Schaltbau Group 5-year summary

Transcription

1 Annual Report 29

2 BUSINESS TRENDS Schaltbau Group 5year summary Group key financial figures Order situation Orderintake Orderbook m. m Income statement Sales Total output EBIT EBIT margin Group net profit Profit attributable to the shareholders of Schaltbau Holding AG Return on capital employed m. m. m. % m. m. % Balance sheet Fixed assets Capital expenditure Amortisation and depreciation Working capital Capital employed Group equity Net liabilities to banks Balance sheet total m. m. m. m. m. m. m. m Cash flow statement Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Change in cash and cash equivalents m. m. m. m Personnel Employees at 31 December Average number of employees Personnel expense Personnel expense per employee Total output per employee Number Number m. 1,63 1, ,599 1, ,551 1, ,456 1, ,475 1, ,3 Key fin. figures for Schaltbau Holding AG Subscribed capital Equity of the AG Equity ratio of the AG Stock market price at 31 December Market capitalisation at 31 December m. % m. 29 6, , , ,5 85, 26 6, , Earnings per share (undiluted) Earnings per share (diluted Dividend per share ,85 3,85,

3 CONTENTS 4 Corporate Mission 5 Executive Board 6 To the Shareholders 8 Combined Management Report 8 A brief summary of the fiscal year 29 8 Major events during the fiscal year 29 9 Activities and general economic environment 9 Structure of the Schaltbau Group 9 Business activities 12 Business environment 12 World economy past the worst 13 Relevant markets for Schaltbau 14 Business performance 14 Orderintake 17 Order book 17 Sales 18 Group earnings performance 2 Net assets and financial position 21 Earnings, financial and net assets position of Schaltbau Holding AG 22 Capital expenditure 22 Research and development 26 Employees 26 Purchasing 28 Significant events after the balance sheet date 28 Opportunities and risks report 33 Executive Board compensation system 33 Explanatory Report of the Executive Board on the information required pursuant to 289 (4) HGB / 315 (4) HGB (German Commercial Code) 34 Corporate Governance Statement in accordance with 289a of the German commerccial Code (HBG) 34 Principles of Corporate Governance and cooperation between the Executive Board and the Supervisory Board 36 Declaration of Compliance pursuant to 161 AktG as at 2 December Outlook 4 Other disclosures 2 Financial Terms 42 Schaltbau Share 46 Corporate Governance Report 52 Explanatory Report of the Executive Board of Schaltbau Holding AG on the information required pursuant to 289 (5) and 315 (2) no. 5 HGB 54 Annual Document 56 Consolidated Financial Statements Schaltbau Group 56 Consolidated Income Statement 57 Consolidated Cash Flow Statement 58 Consolidated Balance Sheet 6 Consolidated Statement of Changes in Equity 62 Notes 19 Responsibility Statement 11 Supervisory Board 111 Report of the Supervisory Board 114 Company Financial Statements Schaltbau Holding AG 114 Balance Sheet 115 Income Statement 116 Auditor s Report 3

4 CORPORATE MISSION The Schaltbau Group develops and supplies systems and components in the fields of transportation technology and industrial applications worldwide. Major global trends such as growing environmental awareness and the increasing need for mobility are constantly driving sustainable, profitoriented expansion. The consistent enlargement of international activities with products that fulfil the needs of the markets is continually enhancing existing potential. The Schaltbau Group bases its endeavours on the specific knowhow of its subsidiaries, which command significant market positions in their respective fields of business and are strategically building upon these with a high degree of dedication in the field of research and development. Organic growth is the result of wellfounded innovation, the concentration on new target groups and greater market penetration. The financial flexibility gained through this strategy enables additional market share to be generated by means of acquisition in a highly promising competitive environment. Thus the Schaltbau Group intends to double its profits over the next five years in terms of earnings per share. 4

5 EXECUTIVE BOARD The Executive Board Dr. Jürgen H. Cammann, BadenBaden Spokesman of the Executive Board Waltraud Hertreiter, Neubeuern Waltraud Hertreiter Dr. Jürgen H. Cammann 5

6 TO THE SHAREHOLDERS Dear Shareholders, Right at the beginning of 29 we began making preparations to deal with possible recession scenarios. From today s perspective that has turned out to be the right decision: the Schaltbau Group too was affected by a significantly deteriorated market environment in 29, particularly in the second and third quarters and above all in the industrial sector. Thanks to our strong order book and the continued broad acceptance of our innovative new products, particularly in the field of Door Systems for Railway Vehicles, we partially made up for the drop in demand brought about by the crisis and were able to achieve our amended sales revenue targets. The real success, however, was shown in earnings. In addition to the exceptional gain arising on the sale of Bode Beijing, the early introduction of measures to reduce costs and adjust capacities played a major role in enabling us to make further improvements in Group earnings, which were already good in the previous year. We also wish to allow our shareholders to benefit from the gain on the sale by paying a special dividend of 2 cents per share. The basic dividend itself will remain unchanged at 5 cents per share. Dr. Jürgen H. Cammann Executive Board Spokesman We have continued to strengthen the Schaltbau Group in balance sheet terms. The equity ratio of 12.2% has more than doubled in comparison to the previous year. Including participation rights capital, which is similar in nature to equity, the equity ratio was as much as 16.4%. We may not have yet attained our objectives, but we have made another major step towards achieving them; a fact that has already been appreciated by the banks. In March 21 we were able to restructure and reschedule our mediumterm financing arrangements on an unsecured basis for the next three years. This fact is ample proof of the trust the creditors have placed in the Schaltbau Group and its prospects for the future. The new financing structure is an important step for the Group because it results in a far greater degree of financial flexibility whilst also laying the cornerstone for increased growth, including that achieved by means of acquisition. In view of the changes to be expected in our market environment, this expansion strategy is absolutely essential. Similar to the automotive supply industry, a concentration process will soon be taking place within the German railway industry and we intend to emerge from this process in a stronger position than before. A number of companies that would fit in well with our concept have already signalised their readiness to sell. We have not only set our sights on companies with high profit margins, we also see ourselves as thoroughly capable of increasing the profitability of any we may acquire. We also see the need to continue the process of internationalising our operations. We will only prosper in the major markets of the future if we also develop and produce on a local basis. The main focus of our endeavours in the coming years will therefore be on Asia. As in previous years, in 29 we continued to strengthen our presence by founding new subsidiaries or making investments in other entities, firstly in China, for the purpose of marketing our newly developed door systems designed to secure railway platforms, and secondly in India, to improve our market penetration in the Components segment. Furthermore, in the Brake Systems business field we have acquired a company in Malaysia that bolsters our position at the central trading hub of Singapore. On the other hand we also took the opportunity to sell our stake in Bode Beijing. We saw this step as unavoidable as we were unable to serve the Chinese market for doors in the way we had originally intended. We will be repositioning ourselves on this key market in the course of 21. 6

7 TO THE SHAREHOLDERS We have been preparing to enter the growth phase with increased manpower for quite a considerable time and have been specifically investing in appropriately trained staff since 28. This is clearly reflected in the rise in the Group's personnel expenses in 29. We intend to step up this process in 21 in order to handle the level of growth we are expecting as from 211. At a highly interesting time for our business, we thus wish to mark the beginning of the next growth phase. Railways are increasingly seen as a viable form of transportation worldwide. In the USA, for example, one of the country's bestknown investors is investing tens of billions of US dollars in this market. The underlying reasons for this are obvious. The growing world population and the constantly rising need for mobility call for efficient solutions that railway systems are capable of providing. Quite apart from the dwindling supply of fossil fuels, the environmental aspects provide additional arguments that make railways stand out from all other forms of transport. It is possible, of course, that rising levels of public debt worldwide could slow down this trend. This does, however, open up opportunities for Public Private Partnerships, which have already proved to be an efficient method of implementing other infrastructure measures such as roadbuilding and which could be an alternative way of financing railway systems too. In practically all economic regions, including South America, consideration is being given to building new railway lines. In view of these facts, one thing is abundantly clear to me: railways have gained momentum at an international level. All of these aspects make us confident that we can double the Group's earnings per share over the next five years, a target fully underpinned by corresponding internal forecasts. In the medium term our dividends will be brought into line with this growth in earnings. We are of the opinion that the stock market will take heed of these future prospects and acknowledge them accordingly. We shall not allow ourselves to be diverted and will continue to write our own success story. Dear shareholders, we very much hope you will continue to place the necessary trust in us in the future. We firmly believe that your investment in Schaltbau has considerable potential. Realising this potential as swiftly and purposefully as possible is the objective of the Executive Board and all employees of the Group. We would like to take this opportunity to thank them for their great commitment and their contribution to the success of the Schaltbau Group throughout the difficult year 29. In a united effort we will make the most of the opportunities that the market presents and continue to guide our enterprise along the path of steady profitable growth, both in 21 and in the years to come. Dr. Jürgen H. Cammann Spokesman of the Executive Board 7

8 MANAGEMENT REPORT Combined Company and Group Management Report of Schaltbau Holding AG, Munich for the fiscal year 29 A brief summary of the fiscal year 29 In a distinctly deteriorated market environment, particularly in the field of industrial applications, the Schaltbau Group was successful in achieving its most recently stated sales revenue targets and again increased its earnings in the fiscal year 29. Although orderintake decreased by 1.5% to million, sales fell by only 3.7% to million. Despite the lower sales figure, Group net profit surpassed the record result of 13.1 million reported in 28 by 1. million. The result for 29 includes an exceptional posttax gain of 1.1 million arising on the sale of Bode Beijing. Earnings per share improved from 6.35 to 6.62, assisted by the exceptional gain. In view of this pleasing earnings performance, the Executive Board will submit a proposal to the Supervisory Board that a dividend of 5 cents per share and an additional special dividend of 2 cents per share arising from the sale of Bode Beijing be paid for the fiscal year 29. The Schaltbau Group also made further progress in balance sheet terms. The Group s equity ratio rose from 5.1% to 12.2% at the end of the reporting period. Major events during the fiscal year 29 The Schaltbau Group continued to pursue its strategy of expanding its international activities in key markets in 29. On 13 August 29 Pintsch Bamag added significantly to its presence in China with the foundation of Shenyang PINTSCH BAMAG Transportation Energy Equipment Co. Ltd. This entity is seen as key to gaining a foothold on the Chinese market for the Group s newly developed Platform Screen Doors (PSD) system for railway platforms, after which the Group will proceed to market this innovative product worldwide. Schaltbau India Pvt. Ltd. was founded on 17 September 29. Schaltbau GmbH has an 8% stake in the new company, a move taking the Schaltbau Group into this important growth market. On 16 November 29 Pintsch Bubenzer indirectly acquired a 1% shareholding in BubenzerMyPort (M) Sdn. Bhd. in Johor (Malaysia). Firstly, as a service company with its own spare parts warehouse, Bubenzer MyPort will provide maintenance and repair services to the port of Singapore. The port is the central hub of the Asian economic zone which Bubenzer will now be able to serve more efficiently. Secondly, from its base in Malaysia, the company will be able to expand its range of services to the Asian port operators. The strategy will also lead to new opportunities in the Gulf region. After China and India, the Russian market is considered to be particularly promising. In order to make the most of existing opportunities for growth, Schaltbau GmbH opened its own representative office in Moscow during the year under report. With effect from 9 December 29 Bode sold its 49% stake in Beijing Bode Transportation Equipment Co. Ltd. (China) via its subsidiary Gebr. Bode & Co. BeteiligungsGmbH. The sale price was above the carrying amount of the investment to the tune of a low singledigit millioneuro amount. The investment in the Chinese joint venture partner was sold due to differences of opinion regarding strategic objectives and operational business. 8

9 MANAGEMENT REPORT DESCRIPTION OF ACTIVITIES AND GENERAL ECONOMIC ENVIRONMENT Schaltbau Holding AG Structure of the Schaltbau Group Schaltbau Holding AG is a financial holding company responsible for Group strategy, appointing the senior management of subsidiary companies, compliance within the Group, public relations, investor relations and IT systems. It is also responsible for Group financial reporting, Group controlling, cash management and risk management, including the internal audit function. The operational activities of the Schaltbau Group are divided into three segments. In order to meet the market's growing need for transparency as well as the requirements of IFRS 8, the Schaltbau Group adopted a new system of segment reporting with effect from 1 January 29. Instead of the two segments formerly reported, the Group's business operations were divided into three segments for the first time in the interim report on the first quarter 29. The change only affects the Mobile Transportation Technology segment, which is now divided into two separate segments Mobile Transportation Technology and Components. The Door Systems business field remains an integral part of the Mobile Transportation Technology segment. The Stationary Transportation Technology segment continues to comprise two business fields, namely Rail Infrastructure and Brake Systems. This segment was also subject to some internal restructuring. With the integration of the Pintsch Bamag brakes business in Pintsch Bubenzer more or less completed in 28, these activities are fully assigned to the Brake Systems business field with effect from 1 January 29. The new segment structure is as follows: BUSINESS ACTIVITIES Mobile Transportation Technology The Mobile Transportation Technology segment represents the product groups Door Systems for Buses, Door Systems for Railway Vehicles and Fittings for Sliding Vehicle Doors. A network of sales and service partners supports customers optimally in their global operations. Schaltbau provides the necessary proximity to key sales markets with representative offices in the United Kingdom, Hong Kong, Korea, Malaysia and Singapore. The Group s companies in Poland and Turkey, each with its own production site, ensure market access in the regions involved. The market launch of the Bode Innovative Door Systems (BIDS) in 25 represented a milestone on the road to international success in the field of Door Systems for Railway Vehicles. The BIDS system consists of the door itself, the sliding or folding step, the drive system and controls, supplemented by emergency handles. The system's elements are all highly standardised and modularly applicable. BIDS covers the railway industry's entire range of requirements and satisfies individual customer needs at the same time. This product range, manufactured by Group subsidiary Bode, makes Schaltbau one of the leading providers in Europe in the field of door systems for railway vehicles and a key partner for railway systems producers worldwide. Mobile Transportation Technology Business Field Door Systems Bode Group Door Systems for Buses / Coaches Door Systems for Railway Vehicles Boarding Aids / Ramps Fittings for Sliding Vehicle Doors Stationary Transportation Technology Business Field Rail Infrastructure Pintsch Group Railway Signal Technology Rail Point Heating Systems Power Supply Systems Vehicle Equipment Warning Systems Maritime Aids to Navigation Business Field Brake Systems Pintsch Bubenzer Group Crane Braking Systems Industrial Braking Systems Wind Energy Braking Systems Components Business Field El. mech. Components Schaltbau GmbH Group Connectors Switches Contactors Control Devices 9

10 MANAGEMENT REPORT Innovation and a high degree of standardisation safeguard Schaltbau's position as European market leader in the field of door systems for both city buses and travel coaches. The Group supplies complete door systems including electronic controls and boarding aids, enabling customers to select from a broad range of products. The components can be optimally combined with each other to suit the requirements of the customer. More space, less weight, reduced costs for installation and adjustment and a lowconsumption electrical system ensure customers a higher degree of flexibility as well as low service and energy costs. A pioneering recent innovation is the Compact Allround Drive System (CADS) that has now been developed to include a completely new type of electrical drive unit. The product group Fittings for Sliding Vehicle Doors comprises guiding systems for sliding side doors designed for both commercial vans and passenger cars. The Schaltbau Group supplies numerous wellknown manufacturers of commercial vehicles. Stationary Transportation Technology The Stationary Transportation Technology segment consists of the two business fields Rail Infrastructure and Brake Systems. The Rail Infrastructure business field operated by Pintsch Bamag primarily manufactures the product group Level Crossing Safety Systems. In addition to the wellproven, fully electronic RBUET level crossing system, the flexibly usable BUEP hybrid technology and the manually operated hlz technology, Pintsch Bamag offers a broad range of technically mature signal components. Pintsch Bamag has the benefit of a great many years of valuable experience in the field of railway signal technology. Working from this wellfounded knowledge base, it develops products that help customers reduce lifecycle costs at a reasonable level of investment. The Schaltbau Group is among the foremost suppliers of level crossing systems to Deutsche Bahn AG, the German national railway network, as well as numerous private, company and port railway systems. The Vehicle Equipment product group includes lighting systems for railway vehicles. The systems developed in this product group are based on knowhow collected in the field of lighting and have been tried and tested for decades in highspeed trains, locomotives, traction units, passenger coaches and trams as well as underground and commuter trains. The product spectrum includes multifunctional front lights, signal lights, rear lights for locomotives, long distance lights, timetable reading lamps for drivers and brake indicator lamps using stateoftheart LED technology. Acoustic and visual warning equipment for vehicles used by authorities, industry and rescue services as well as for civil management and disaster control are sold throughout Europe. Maritime aids have been a guarantee of safety both on the open seas and inland waterways for over 14 years and emphasise the Schaltbau Group's high degree of expertise in the field of lighting technology. The Point Heating Systems product group is also part of the Rail Infrastructure business field. Apart from its core competence in developing and manufacturing electrical and gasinfrared point heating systems, it also produces tunnel safety illumination systems. The products of the Brake Systems business field are suitable for every situation in which large, heavy loads need to be transported. This is exemplified by cranes used to perform heavyduty work in the container terminals of all major ports throughout the world and for which the safe, reliable functioning of rail brakes, heavyduty brakes, trolley and hoisting gear brakes and swinging arm brakes is of 1

11 MANAGEMENT REPORT the highest importance. The crane braking systems manufactured by Pintsch Bubenzer, a subsidiary of the Schaltbau Group, are world market leaders in this field. Wind power plants constitute a highly promising field of application in the Brake Systems business field and cover the supply of tower and rotor brakes as well as rotor locking systems, including the matching hydraulic systems, brake discs and couplings. The use of perfectly adjusted monitoring systems allows considerable costsavings, including for offshore plants. The often gigantic tunneldigging and clearing machines, conveyor systems and bucketwheel excavators used in mining as well as applications for the steel industry and magnetic brakes for shipping applications are further examples of highly specialised challenges for braking systems. In equipment designed for crushing orebearing rock, the braking systems develop braking torque of more than 2,, Nm. The technological knowhow involved in developments of this type make Pintsch Bubenzer one of the leading development partners and system suppliers worldwide. 11

12 MANAGEMENT REPORT Components The Components segment comprises the product groups Connectors, Snapaction Switches, Contactors and Control Devices produced by the Schaltbau GmbH Group. In addition to its German locations in Munich and Lower Bavaria, The Schaltbau Group maintains local presence in key international markets via its companies in France, the United Kingdom, China, Hong Kong and the USA. A subsidiary was founded in India during the third quarter 29 to prepare entry to this important growth market. Components for the railway market such as contactors, master controllers, toggle switches and dead man's foot switches are manufactured for the Asian market in Xi'an, China. A further production plant in Shenyang, China, is dedicated to the manufacturing of contactors for industrial applications. The French market is served via the French national company. The acquisition of Machine Electrics in 28 has considerably improved the Group's market position in the United Kingdom, particularly for contactors in industrial trucks and emergency power systems. All products in this business field are manufactured to meet highest specifications for a wide variety of niche applications. Connectors are vital components in many fields of communication and railway technology as well as in industrial trucks and numerous other industrial applications. Snapaction switches from Schaltbau are known for their high reliability, long service life, dependability even when subjected to shocks or vibrations and above all for their positive opening operation feature. Due to its versatility, this type of switch is suitable for all kinds of safetyrelated applications and for this reason is built into the door systems of a wide range of railway vehicles such as local and longdistance trains, trams and underground trains. Schaltbau is world market leader in this field. A number of niche markets such as parachuting are also served. The trend towards miniaturisation will also open up entirely new fields of application for this product group in the future. Schaltbau contactors are required wherever highvoltage applications need to be switched using low voltage. The quality of a contactor is most apparent when it comes to switching off. During the process, electric arcs are ignited between the contacts as they open, which then have to be reliably extinguished within a few milliseconds. Schaltbau contactors dependably perform this task both in industrial trucks and emergency power systems that, for instance, play a major role in safeguarding data security during power cuts in telecommunication facilities and computer centres as well as in locomotives and traction units. Control Devices are specially designed for the requirements of railway vehicles and play an important role in their safe and comfortable operation. The product range includes driver's cab and passenger equipment, highvoltage switchgear and roof equipment as well as electrical braking equipment. BUSINESS ENVIRONMENT World economy past the worst The world economy experienced the worst recession for over 5 years in 29. According to the Organisation for Economic Cooperation and Development (OECD), the volume of world trade contracted, on an annualised basis, by more than 2% just in the sixmonth period up to the end of March 29. The OECD reports show that industrial production was hit unusually hard. The world economy did, however, manage to recover perceptibly over the remaining course of 29, particularly due to rising demand in the growth markets of Asia. The positive impact from some countries, headed by China and India, is evident in the growth rate figures registered at the beginning of 21. These were estimated by economists at Deutsche Bank as having been 8.5% and 6.% respectively and therefore above expectations at the beginning of 29. By contrast, forecasts for the USA had to be lowered slightly and those for Japan and Europe quite significantly. Overall, based on the latest estimates, the world economy contracted by 1.1% in 29 and therefore at a faster rate than predicted one year earlier. Alongside Japan, where economic output dropped by 5.% according to Eurostat, the countries of the European Union were hit particularly hard by the world economic crisis with a negative growth rate of 4.1%. The eastern EU member states had to cope with enormous pressure, with Poland the only country to record moderate growth in gross national product (GNP). Against this background, the German economy suffered its greatest slump since the Second World War. According to figures released by the German Federal Bureau of Statistics, GNP declined by 5.% in real terms in 29. The slump took place mainly during the months around the turn of the year 28/29. In the course of the year, however, economic output stabilised at a low level in line with economic performance worldwide. The Federal Bureau of Statistics figures also reveal steep drops both in exports and in investment in plant and equipment in 29. Exports generally seen as the cornerstone of the German economy significantly held down the growth rate 12

13 MANAGEMENT REPORT during the year under report. After price adjustments, exports were 14.2% down on the previous year, whereas imports fell by only 8.9%. Investment in plant and equipment dropped sharply by 2.5%. Partially supported by governmental economic stimulus programmes, construction investment fell by only.8%. Shortterm state spending, however, rose by 3.%. Private consumer spending proved unexpectedly resilient and grew marginally (by.2%) compared to the previous year. Relevant markets for Schaltbau Within the Door Systems business field, general business conditions relevant for bus doors worsened considerably in 29 in the wake of the financial and economic crisis. Particularly the travel coach companies both at home and abroad were extremely hesitant to invest. Together with the local public transport sector they exert the greatest influence on performance in the bus business. This fact is apparent from the statistics of the Association of the German Automotive Industry (VDA). According to those figures, only 7,8 buses were produced in Germany in 29, 22% fewer than the 1, vehicles 13

14 MANAGEMENT REPORT Orderintake Disclosures in m. produced one year earlier. The weakness of the domestic market was also evident in the number of new registrations, which fell by 5% to 5,6 buses. The number of buses exported dropped by 25% to 5,9 units. By contrast, the Door Systems for Railway Vehicles product group recorded very good project business levels during the first few months of 29. The downturn first recorded by the Fittings for Sliding Vehicle Doors product group in autumn 28 as a result of the financial crisis gathered pace initially in the early part of 29. Market conditions did, however, improve noticeably over the course of the year. The order situation in the Rail Infrastructure business field is heavily influenced by the investment behaviour of Deutsche Bahn AG, the German national railway company. The service and financing agreement (LuFV) made between Deutsche Bahn AG and the German Federal Ministry of Transport in January 29 ensured a stable basis for business. Under the terms of the LuFV agreement, 2.5 billion per year will be made available for the modernisation of the existing rail infrastructure between now and 213. In addition, the government's economic stimulus packages helped create a positive environment for infrastructure measures, even though implementation did fall a good deal short of the high expectations held. The Brake Systems business field experienced an extremely difficult market environment in 29. Transport volumes sank drastically due to the major slump in world trade during the year under report. The willingness to invest in the container terminals market was correspondingly low, severely affecting performance in the Brake Systems business field. According to the German WindEnergy Association, the new target market "wind power" again registered growth in 29 despite fears to the contrary. The driving force behind this renewed positive performance was China, which almost doubled its previous year's capacity with a newly installed output of 1, to 12, MW. In the USA too, the installed output shot up surprisingly sharply to 9,9 MW, thanks to the economic stimulus packages introduced by the Obama Administration, compared with a figure of 8,4 MW for 28. The Brake Systems business field is currently still in the startup phase in this attractive market environment. The Schaltbau Group has therefore managed to gain access to a market with considerable potential for growth that it intends to utilise by continuing to expand its activities. In the Components segment, business with Railway Products and Rolling Stock was supported by unexpectedly strong demand from Asian markets. Railway transportation systems in China benefited in particular from government economic stimulus packages. In contrast, declining goods transportation figures in countries in other regions resulting from the unfavourable economic situation led to delays in major railway projects. Business with industrial applications generally continued to decline in the face of the economic crisis. BUSINESS PERFORMANCE Orderintake In a sector that is normally late in the business cycle, the Schaltbau Group felt the impact of the economic crisis with a corresponding delay in the fiscal year 29. The order situation was especially negatively affected in the third quarter by the difficult market conditions previously described. In the final quarter of the year, however, orderintake was up on the corresponding period one year earlier. Orderintake for the Group totalled million in 29, a drop of 1.5% on the million recorded in the previous year. 14

15 MANAGEMENT REPORT Incoming orders of 11.8 million were registered in the Mobile Transportation Technology segment, 9.5% lower than the previous year's figure of million. Bus manufacturers scaled back their production programmes considerably in the face of the financial and economic crisis. Demand in the Door Systems for Buses product group was correspondingly subdued, resulting in a sharp drop in order volumes. The travel coaches business was particularly hard hit. Some success was registered in the fourth quarter with new customers gained in Italy and Poland. Schaltbau's leading position in Europe as a bus door systems provider was further extended. Incoming orders for the Fittings for Sliding Vehicle Doors product group were down. Over the course of the year, however, curtailments in construction programme volume on the part of customers at the beginning of 29, some of which had been quite substantial, were almost fully offset for the year as a whole. The stimulating effect of the scrappage bonus was a major cause of increased sales volume in the field of commercial vehicles. 15

16 MANAGEMENT REPORT Order book Disclosures in m. In 29 the Door Systems for Railway Vehicles product group recorded ordertake at a high level similar to the previous year. The standardised BIDS drive concept has prevailed in the market for railway vehicles. New developments and excellent delivery performance were also key factors in promoting an atmosphere of trust among customers on a sustainable basis. The Stationary Transportation Technology segment recorded an orderintake of 8.6 million (28: 98.4 million), down 18.1% on the previous year. Performance in the Rail Infrastructure business field was greatly hampered by the sluggish implementation of government economic stimulus programmes, which did not begin to take effect until well into 29. Demand for the Level Crossing Safety Systems product group was accordingly subdued. Particularly in the first six months of the year the holdup in investments for major signals projects seemed to worsen. The situation eased somewhat during the second half of 29 and continued to improve gradually up to the end of the year. The German national railway was responsible for an increase in orderintake in the fourth quarter. Highlights in the Rail Infrastructure business field were orders for a considerable number of level crossing systems. These orders were placed in 29 in conjunction with the socalled "Blinklichtprogramm 21". The majority of these orders related to single systems and not to a major project. By contrast, business with private railway companies remained under pressure owing to weak demand in the wake of the economic crisis and fierce competition. In the other three product groups Equipment for Railway Vehicles, Warning Technology and Maritime Aids to Navigation the order situation remained largely unchanged compared to the previous year. The Brake Systems business field suffered from a delayed reaction to the financial and economic crisis. After performing well during the first four months of the year, the ongoing weakness in international container traffic led to a slump in incoming orders from May onwards. However, after three extremely weak months in succession, demand stabilised at a low level in August. Despite the difficult market conditions it was possible to retain and in some cases even slightly improve market share. In the promising market for wind power plants, a number of manufacturers placed smallscale orders for brakes for test installations. All relevant qualification programmes were successfully passed during the year under report. The Components segment recorded orderintake of 69.2 million (28: 7.1 million) during the year under report, 1.3% down on the previous year. After experiencing declining demand in industrial business during the first six months of the year, the segment s order situation became increasingly stable during the remainder of the year. In November, Schaltbau was awarded a major order for connectors, causing fourthquarter figures to surpass those of the previous year and bringing the fiscal year 29 to a favourable end. Schaltbau s UK subsidiary, which plays a relatively minor role from the Group's point of view with its focus entirely on industrial applications, suffered a severe slump in orderintake right from the beginning of the year due to the economic crisis. Despite a moderate improvement from September onwards, orderintake for the full year was well down on 28. Schaltbau France was largely able to maintain incoming orders at the previous year's level. The Chinese joint venture in Xi an, however, recorded an improvement on last year's figure. 16

17 MANAGEMENT REPORT Order book The order book stood at million at the end of the year under report (28: million). The Mobile Transportation Technology segment reported an order book of 89.3 million (28: 96.2 million) at the end of the year. The Stationary Transportation Technology segment had orders totalling 4.6 million (28: 55.1 million) on hand. The order book of the Components segment increased to 33.6 million (28: 3.4 million). Sales The Schaltbau Group achieved its sales target for 29 despite the impact of the worldwide recession. Although fourthquarter sales revenue was still down on the previous year, it represented a further improvement on the preceding quarter. The sales performance in 29 therefore generally reflected the pattern of orderintake. The Schaltbau Group generated sales of million in 29, 3.7% down on the previous year's figure of 28.2 million. 17

18 MANAGEMENT REPORT The Mobile Transportation Technology segment recorded sales revenue of 18.8 million, 1.3% up on the previous year's figure of 17.4 million. The sales performance by product group varied considerably. The Door Systems for Railway Vehicles product group benefited in particular from brisk demand for standardised BIDS systems and boarding systems. Both the spare parts and the ramps business performed encouragingly and better than expected. Sales revenue recorded for this product group increased such that decreases recorded for the other two product groups were more than offset. The negative impact of the financial and economic crisis caused sales revenue to fall in the City Bus and particularly in the Travel Coach sector. Orders received in the fourth quarter of 29 will not be materialised as sales until 21. lower volume of world trade, with the expansion of port capacities particularly hard hit by the economic crisis. The first sales recorded for the newly developed brake systems for wind power plants in 29 are a sign of promise for the future. The Components segment achieved sales revenue of 66.2 million, 2.4% down on the 67.8 million recorded in 28. The components market for railway applications was maintained at the previous year's level, whereas business with components for industrial applications dropped sharply towards the middle of the year, subsequently showing a slight recovery in the fourth quarter. Sales were down in Germany and the United Kingdom, whereas the Chinese market generated some perceptible momentum for growth Sales Domestic Abroad Disclosures in m. Sales of the Stationary Transportation Technology segment totalled 94.7 million (28: 14.9 million), a drop of 9.7%. Due to the good order book figures and above all the noticeably growing demand in the fourth quarter, sales generated in the Rail Infrastructure business field adjusted for the brakes business allocated to the Brake Systems business field almost matched the high level recorded in 28. In the field of level crossing systems the very weak private railways market was offset by good business performance with the German national railway. The following selected projects were completed: sliding steps to bridge the gap between the train door and the platform for a customer in Hungary; two deliveries of strip lighting systems for police cars in the German states of North RhineWestphalia and BadenWürttemberg; and projects supplying maritime aids to navigation for the straits between India and Sri Lanka. Sales revenue in the Brake Systems business field also declined considerably due to the Group earnings performance Despite the difficult market situation and lower sales revenue due to the economic downturn in 29, the impact on Group earnings was largely absorbed thanks to the timely implementation of countermeasures. The gain recognised on the sale of Bode Beijing helped to push earnings above the previous year s level. The Schaltbau Group's total output decreased at a greater rate than sales in 29 from million in 28 to million in 29, mainly reflecting a targeted 7.2% reduction in inventories. This reduction was, however, largely offset by a policy of strict cost management across the board. The extent to which this policy succeeded is reflected in the operating profit (EBITDA) figure, which only fell by 4.7% to 26.5 million (28: 27.8 million). Significant savings were made in particular in the cost of materials. The cost of materials ratio was reduced from 53.5% to 5.5%. In addition to favourable developments in raw 18

19 MANAGEMENT REPORT material prices, other costcutting measures in the field of purchasing and a reduction of temporary staff also contributed to lower cost of materials. Collectively bargained tariff increases and targeted staff recruitment, particularly in the Rail Infrastructure business field, were responsible for the rise in personnel expenses within the Group to 81.7 million (28: 79.4 million). Other operating expenses were reduced to 26.5 million (28: 28.4 million) by means of costcutting measures and lower sales revenuerelated costs. This compared with other operating income of 5. million (28: 4.2 million), with the increase mainly due to the reversal of personnelrelated provisions. At 6.1 million, the amortisation and depreciation expense was at a similar level to the previous year. The Schaltbau Group recorded a profit from operating activities (EBIT) of 2.3 million (28: 21.9 million). The EBIT margin was 7.5% (as a percentage of sales) and therefore almost at the previous year s high level of 7.8% despite unfavourable business conditions. The Group s net financial expense improved by.7 million to 5.7 million, partly reflecting lower average interest rates compared to the previous year. 19

20 MANAGEMENT REPORT Financial Terms Capital employed Working capital plus fixed assets EBITDA Earnings before interest, taxes, depreciation and amortisation EBIT Earnings before interest and taxes EBT Earnings before taxes Equity ratio Equity/balance sheet total Pretax return on equity EBT/equity IAS/IFRS International Accounting Standards/ International Financial Reporting Standards Cash funds Cheques, cash in hand and cash at bank Cost of materials ratio Cost of materials/total output Net bank liabilities Bank liabilities minus cash funds minus current marketable securities The result from investments relating to companies accounted for using the equity method rose from.3 million to 2.3 million and was primarily influenced by the sale of the 49% stake in the Chinese company Beijing Bode Transportation Equipment Co. Ltd. In the previous year, the result from investments had been adversely affected by the recognition of a risk provision for this joint venture. Overall, the profit from ordinary activities improved to 16.9 million (28: 15.8 million). The income tax expense for the year increased marginally to 2.8 million (28: 2.7 million). Group net profit of 14.1 million was 1. million higher than one year earlier. The profit attributable to minority shareholders amounted to 1.7 million (28: 1.2 million). The profit attributable to shareholders of Schaltbau Holding AG amounted to 12.3 million, an improvement of.5 million or 4.3% on the previous year. At 6.62, undiluted earnings per share exceeded expectations (28: 6.35). In view of the Group's pleasing earnings performance, the Executive Board will submit a proposal to the Supervisory Board that a dividend of 5 cents per share plus an additional special dividend of 2 cents per share for the sale of Bode Beijing be paid. Earnings of the Mobile Transportation Technology segment improved in 29, helped by a small sales revenue increase of 1.4 million, higher margins on new products and further improvements in productivity. The segment EBIT increased from 4.2 million to 6. million, with the EBIT margin improving from 3.9% to 5.5%. In the Stationary Transportation Technology segment the 1.2 million decline in sales revenue was due to the steep drop in business in the Brake Systems business field. As a result, the operating profit fell from 11.8 million to 8.9 million. The EBIT margin deteriorated to 9.4% (28: 11.2%). Despite a small decrease in sales revenue, the Components segment improved its EBIT further from 9.3 million in 28 to 9.6 million in 29, thanks mainly to the early introduction of costcutting measures and positive business figures from China. The EBIT margin, which was already very good, simultaneously rose from 13.7% to 14.6%. Net assets and financial position The Group net profit recorded for 29 resulted in a further improvement in balance sheet ratios. Group equity rose to 2.5 million at 31 December 29 compared to 8.6 million one year earlier. This corresponds to an equity ratio of 12.2% (28: 5.1%). Including participation rights capital of 7. million, which is similar in nature to equity, Group equity therefore amounted to 16.4% (28: 9.3%). The Group s assets and liabilities structure did not change significantly during the year under report. Noncurrent assets (excluding deferred tax assets) of 61.5 million (28: 6.5 million) accounted for 36.6% of the balance sheet total (28: 36.%) and thus remain largely unchanged. Investments in property, plant and equipment amounted to 6.6 million and were therefore 1.4 million higher than the depreciation expense. Intangible assets again included own work capitalised for a development project. Noncurrent financial assets were influenced by the sale of the investment in Beijing Bode Transportation and the earnings contributions from BODO Bode Dogrusan and Schaltbau North America, both of which are accounted for using the equity method. 2

21 MANAGEMENT REPORT Group working capital increased from 52.2 million to 53.8 million. Targeted measures were applied, enabling inventories to be reduced by 12.2 million to 41.1 million. Working in the opposite direction, trade accounts receivable went up by 4.6 million. Advance payments received from customers were 4.6 million below last year's figure at 31 December 29, which also had the effect of increasing working capital. In addition, trade payables were 4.7 million lower, partly due to the increased utilisation of cash settlement discount in the Mobile Transportation Technology segment. At million, capital employed was higher than the previous year's figure of million. The return on capital employed (ROCE) was 17.6% (28: 19.4%). Deferred tax assets were recognised at 8.9 million (28: 9. million). This figure includes deferred tax assets of 4.2 million recognised on timing differences (28: 3.8 million) and deferred tax assets of 4.7 million recognised on tax losses available for carryforward (28: 5.2 million). Deferred tax liabilities on timing differences amounted to 6.5 million (28: 6.3 million). Net liabilities to banks were reduced from 37.7 million to 33.9 million through the repayment of loans. The Group has access to shortterm credit lines of 34. million (28: 36.4 million) which were all being utilised at 31 December 29. This figure also includes a guarantee facility of 6. million (28: 5.6 million). It is also netted against cash funds since these had not been credited to the corresponding accounts at the yearend due to timing reasons. Loans at 31 December 29 amounted to 31.7 million (28: 36.5 million). Scheduled repayments in 29 totalled 7.6 million (28: 5.3 million). The Schaltbau Group is financed partly by Schaltbau Holding AG s credit lines (see comments on that entity) by means of cash pooling arrangements and partly through separate bank financing arrangements for the subsidiaries Pintsch Bamag and Schaltbau GmbH. The shortterm credit lines in the cash pool are committed until 31 March 21 and the corresponding prolongation is expected. Gebr. Bode, Kassel has its own financing arrangements. Its credit lines totalled 13.1 million at 31 December 29 (28: 14.5 million). Current account lines of 3.1 million have been prolonged until 31 December 21. Cash flow from operating activities of 16.2 million was 3.2 million higher than in the previous year. Within that figure, current liabilities were reduced by an even greater amount than in the previous year, but this was more than offset by a reduction in current assets (28: increase). The cash outflow for investing activities of 9.8 million was higher than the previous year's figure of 8.3 million. The remaining cash flow was utilised to pay dividends to shareholders and minority interests of 3.2 million and to build up cash funds. Earnings, financial and net assets position of Schaltbau Holding AG As in the previous year, the Company Financial Statements of Schaltbau Holding AG are prepared in accordance with the German Commercial Code (HGB) and the Stock Corporation Act (AkG). Sales revenues of the nonoperational Schaltbau Holding AG totalled 1.5 million (28: 1.2 million) and comprised revenue from recharging the cost of the centralised IT system. Financial Terms Personnel expense per employee Personnel expense/average number of employees during year Personnel intensity Personnel expense/added value Return on Capital Employed (ROCE) EBIT/capital employed Pretax and preinterest return on sales EBIT/sales Debt/equity ratio Net liabilities to banks/ebitda Value added EBIT plus personnel expense plus other taxes Working capital Trade accounts receivable (including receivables from longterm construction contracts) plus inventories minus trade accounts payable minus advance payments received Working capital intensity Working capital/sales 21

22 MANAGEMENT REPORT The earnings position of Schaltbau Holding AG is primarily influenced by the profits and losses transferred to it by its subsidiaries, the impact of the valuation of investments and the net interest result relating to its financing function. Profit and loss transfer agreements are in place between Schaltbau Holding AG, Schaltbau GmbH and Pintsch Bamag GmbH, which, in turn, has a profit and loss transfer agreement in place with Pintsch Bubenzer GmbH. The various profit transfers under these agreements decreased from 15.3 million in 28 to 13.3 million in 29. The subsidiaries have performed well in the face of the difficult business conditions. The Group s net interest result improved by approximately.7 million to 2.1 million due to lower interest rates. The profit from ordinary activities of 1.2 million was.8 million higher than in the previous year. During the year under report a reversal of an impairment loss of 3.5 million was recognised on the investment in Gebr. Bode GmbH & Co. KG, after the business situation of this investment significantly improved. The Company reports a net profit for the year of 9.2 million (28: 8. million). As a result of tax losses available for carryforward, the effective tax rate is approximately 1%. The assets and liabilities structure of Schaltbau Holding AG has not changed significantly compared to the previous year. With total assets of 95.9 million (28: 85.1 million) the balance sheet is dominated by noncurrent financial assets with a carrying amount of 79.9 million (28: 74.1 million). Interests in associated companies were up by 5.8 million to 77.7 million, reflecting the reversal of the impairment loss on the investment in Bode as well as capital increases at Pintsch Bamag and Schaltbau GmbH. As in the previous year, the 137,27 participation rights bought back by the Company in 26 are also included in noncurrent financial assets at the yearend at their buyback cost of 2.2 million. The market value of the participation rights was 3.5 million at 31 December 29. The participation rights are now fully available to the Company, although it does not currently intend to sell or withdraw them. Accounts receivable from and payables to affiliated companies result from cash pooling arrangements with subsidiaries or from obligations connected with profit and loss transfer arrangements. The Company issued convertible bonds totalling 8.5 million in June 27. No conversions took place during the year under report. The number of shares therefore remained unchanged at 1,871,668. Following the scheduled repayment of 4. million, the Company s longterm loan stood at 9.5 million as at 31 December 29 and is repayable by 31 December 21. A current account credit line of 14.9 million remains in place and has been committed until 31 March 21 and 31 August 21 respectively (see: "Significant events after the balance sheet date"). The interest rates payable on loans are linked to Euribor. The Company complied with the financial covenants contained in the loan contracts in 29. Schaltbau Holding AG's equity rose from 49.4 million to 57.7 million. The equity ratio now stands at 6.2% (28: 58.%). The financial strength built by Schaltbau Holding AG allows it to take an active part in the further development of its subsidiaries. Capital expenditure Investments in property, plant and equipment and intangible assets in the Schaltbau Group in 29 rose to 9. million compared with 6.3 million one year earlier. Capital expenditure was therefore once again significantly higher than the amortisation and depreciation expense of 6.1 million recorded for the year (28: 6. million). The largest single investment related to a construction measure at Pintsch Bamag. Further focuses for capital expenditure were replacement, reequipping and rationalisation measures as well as the purchase of tools for new products. Research and development Targeted research and development oriented to the quickly changing requirements of customers and markets is of strategic importance for the companies of the Schaltbau Group and is seen as a crucial investment in the future. Innovative products and solutions safeguard Schaltbau's technological lead and thus form a solid foundation for successful and sustainable operations. The Group's intensive research and development (R&D) activities were maintained at a high level despite the crisis. This fact was evident in the ratio of R&D expenditure to Group sales which edged up from 6.% to 6.2%. The strength of Schaltbau s R&D workforce also demonstrates the significance attached to this field, particularly in times of crisis. With 189 employees, every tenth person in the Group is involved in setting the course for continued business success. 22

23 MANAGEMENT REPORT In the Door Systems for Buses product group within the Mobile Transportation Technology segment, the standardised compact drive for bus doors was developed further, with the main focus on the Compact Allround Drive System (CADS). The Group presented a new electric drive system for outswinging plug doors at the "Busworld 29" trade fair in Kortrijk, Belgium during the year under report. This innovation completes the product range for the CADS system and the experts are working intensely to reach the series production stage as soon as possible. The high level of interest shown by customers is an indication that the new systems have considerable market potential. The boarding aids product range has been expanded to include a newly developed overlying, electronically driven integrated ramp. The ramp serves as a boarding aid for city buses and travel coaches and can be controlled from the driver's seat. It is more compact than its predecessor and can be lowered to the height of the road or the level of the entry platform. It also rounds off the product range offered by the Schaltbau Group as a system supplier and provides the opportunity to sell further components in addition to door systems. 23

24 MANAGEMENT REPORT The central focus of the Door Systems for Railway Vehicles product group was the further development of existing boarding systems. One major innovation is the intelligent boarding system, which recognises the shape of the platform with the help of a special sensor and accordingly controls the movements of each separate step. The innovative product not only has potential to crease new business, existing boarding systems can also be expanded by means of a supplementary package. The intelligent boarding system has set a new trend for the market that is likely to last. One major order received at the beginning of the year under report, for example, included the delivery of approximately 1,2 of these innovative boarding systems. The successful BIDS Door Systems product family was expanded to include a singleleaf variant. A significant step forwards for the Rail Infrastructure business field is the Platform Screen Doors control system, originally developed for the Chinese market. The aim is to equip railway stations in northern China with this system in the course of the current fiscal year. Based on existing knowhow, a considerable amount of development resources has been allocated to this new application, reflecting the fact that considerable potential is seen for the Platform Screen Doors product group worldwide in the future. The main emphasis of development in the Level Crossing Safety Systems product group was placed on the RBUET application software and the BUEP successor technology RBUEP. Pintsch Bamag has already produced software and hardware prototypes for the new BUE technology and is currently handling the validation and approval process. Full approval is anticipated in the course of 21. Development of the LED additional indicator was also completed, including receipt of product approval. Within the Warning Technology product group, a new LED rear warning light was developed for which Schaltbau is listed as sole supplier for Volkswagen. Testing and further development of wind power brakes enabled the Schaltbau Group to improve its position in this growth market during the year under report. The development of a new type of compact brake for General Electric was an outstanding achievement during the reporting year. Since the middle of 29, the Group has been able to offer a range of products suitable for a great variety of applications, such as pitch, rotor locking systems, rotor brakes and azimuth. All types of braking systems required in the field of wind power technology can now be supplied in a systemcompatible way. The world market was estimated to have a volume of some 1 million in 28. Despite a major setback in 29 due to the economic crisis, the future prospects for this market are very bright. The mediumterm annual sales potential for the Brake Systems business field is in the low doubledigit millioneuro region. The primary emphasis of R&D activities in the Components segment in 29 was on the product group Traction Contactors. The main work involved further development of the new CT model range and the development of a new contactor for which the switchable current can be doubled to 8A. The "Lichtbogenführung" (electric arc guidance) research project, which was started in March 28 in cooperation with the Research Institute and the Professorships for Fluid Dynamics and Electrical Power Supply of the University of ErlangenNuremberg, was continued. In conjunction with the project, for which a grant of 345, was received from the Bavarian Research Foundation, the first video recordings of electric arc guidance in CT contactors under varying loads were filmed with highspeed cameras at the end of 29. The results of the project, which will be concluded during the first half of 21, are to form the basis for further interpretations for other scales as well as inductive and capacitive switching loads of the contactors. 24

25 MANAGEMENT REPORT New standards and guidelines, particularly the International Railway Industry Standard (IRIS), have also provided impetus for R&D activities. This standard has become an important criterion when selecting suppliers to work in the railway vehicle industry. For the purposes of safety and function certification for railway engineering, classification of a product to a particular Safety Integrity Level (SIL) is also extremely important. Industrial activities are influenced by a new Machinery Directive and the related classification into Performance Levels (PLs). The higher safety requirements resulting from the directive have led to a whole range of new development projects being set up. Trade fairs Schaltbau Group entities displayed their various ranges of products and their innovative strength at the industry's foremost trade fairs in 29. A new compact electric drive system for outswinging plug doors was presented at the "Busworld 29" trade fair in Kortrijk, Belgium from 16 to 21 October 29. This innovative system completes the CADS system range of products and is currently being prepared for series production and sale on the market. Customers showed a remarkably high level of interest in the new development. Schaltbau Group entities also presented their wares at the UITP World Congress and Mobility & City Transport Exhibition in Vienna from 7 to 11 June 29. The UITP was the most important trade fair held in 29 in the field of railway technology and proved to be a key opinion barometer, particularly in a time of crisis. A number of trade fairs in the field of warning technology were also attended. The Brake Systems product group presented its latest innovations at various port and wind power trade fairs. 25

26 MANAGEMENT REPORT Total output per employee Disclosures in Employees on average Number of employees Employees At 31 December 29 the Schaltbau Group employed a workforce of 1,63 people, four more than one year earlier. Various changes took place within the Group during 29. On the one hand, Schaltbau Machine Electrics Ltd. significantly reduced the size of its workforce in response to the extremely weak market situation. On the other hand, however, the number of employees was moderately increased in many of the other Schaltbau Group companies. For strategic reasons, most of the new staff taken on were recruited in the Rail Infrastructure business field, particularly in the areas of purchasing, work preparation and development. The number of temporary staff was considerably reduced, reflecting the fact that capacity utilisation peaks were far fewer in 29 due to the overall lower volume of orders. Lower production capacity requirements were also taken into account by getting employees to use their holiday entitlements and flexitime. Improving the skills of the workforce is seen as an important investment in the future. The Schaltbau Group invested over 62, on training its staff during the year under report (28: 53,). Participants were able to broaden their technical knowledge in a variety of training sessions, courses and seminars. Production employees received training in the areas of series production excellence and the continuous improvement process. Training sessions on ERA performance evaluation and techniques for conducting interviews with employees were central topics for managers. Apart from additional individual courses offered externally, employees also took part in training sessions for the SixSigma quality management methodology as well as foreign language refresher courses. Great importance was attached to vocational training again in 29 in recognition of the fact that highquality, targeted training makes a vital contribution towards ensuring that the Schaltbau Group s sophisticated products, components and systems will continue to be manufactured by a qualified workforce in the future. A total of 71 trainees at various Schaltbau entities are currently learning their trades in soughtafter areas such as cutting machine operator, industrial business management assistant or IT specialist. Bode is currently training 21, Pintsch Bamag 19, Pintsch Bubenzer 9 and Schaltbau GmbH 18 young men and women. There are also three trainees working at the Chinese subsidiary Xi an and one trainee at Schaltbau France. During the year under report a total of 14 trainees completed their apprenticeships, most of whom were offered further employment, initially on a temporary contract basis. A total of 38 people at various Group companies were employed under preretirement parttime working arrangements, 28 of which had already entered the nonworking phase. Preretirement parttime working arrangements were in place at four Group companies based in Germany. Personnel expenditure increased from 79.4 million to 81.7 million due to tariffbased rises and the targeted recruitment of skilled workers and executive staff. The total output per employee, including trainees and managers, fell from 198,2 to 182,3 due to the lower level of total output in the year under report. On average, 1,437 fulltime employees worked for the Schaltbau Group during 29 compared to 1,424 in 28. Purchasing The pressure caused by changes in purchasing prices eased noticeably in 29 compared to the drastic increases seen in the previous year. The price of flamecut steel parts sank particularly sharply. Moderate price reductions were registered for electronic circuit boards, hydraulic control units and rolled steel. Only 26

27 MANAGEMENT REPORT aluminium became considerably more expensive on the London Metal Exchange during the year under report. The prices of all other metals remained generally stable. The Schaltbau Group's purchasing management continued to follow the strategy of safeguarding supplies of raw materials and components for as long as possible at favourable prices whilst retaining the same degree of high quality and supply reliability. The key tasks of the purchasing department in this connection were to conclude projectrelated, multiyear agreements and ensure that series production parts are contractually covered. For the first time, purchasing management was able to make groupwide framework agreements that not only benefited companies in the Schaltbau Group, but also their suppliers. This had a positive impact on the prices of components and systems such as assembled cables. Agreements for the supply of copper semifinished products were signed at the optimum point in time for the maximum possible contractual duration. The Group continued to exploit the benefits of internationalised procurement markets and countryspecific advantages. One example of this is the increased volume of light metal cast parts purchased in Asia. After extensive preparation, the procurement of nodular iron from China also looks highly promising. A further supplier of steel turned parts was gained during the year under report. In all cases, however, new series suppliers are only approved after successful qualification and auditing. Value analysis teams and standardisation groups also help to avoid and reduce costs. These measures all made their contribution towards improving the procurement situation within the Schaltbau Group in 29, as reflected in the favourable change in the overall cost of materials. 27

28 MANAGEMENT REPORT The cost of materials ratio for 29 (as a percentage of total output) was 5.5% compared to 53.5% in the previous year. Apart from groupwide purchasing management, which coordinates all of the main purchasing positions across the Schaltbau Group, the increased use of cash settlement discounts by Bode in Kassel also made an important contribution to reducing procurement costs in 29. Significant events after the balance sheet date The shortterm credit lines available from the cash pool run until 31 March 21. In the meantime Commerzbank AG has been given the mandate to arrange the financing of 5 million for a period of three years on an unsecured basis, taking specified framework conditions into account. On 19 March 21 a consortium loan agreement for 5 million was entered into between Commerzbank AG, Bayern LB and DZ Bank on the one hand and Schaltbau Holding AG on the other. This consortium credit will be used to repay 45 million of the cash pool liabilities (mainly short and mediumterm credits). Under the terms of the new agreement, 2 million will be rescheduled as a loan repayable in instalments and the remainder ( 3 million) will be made available as a credit line. The financing has been committed up to 19 March 213 and will be granted on an unsecured basis. The credit agreement includes warranties and covenants that are customary for this type of financing arrangement. Schaltbau GmbH, Pintsch Bamag GmbH and Pintsch Bubenzer GmbH are parties to the credit agreement as borrowers and guarantors. Opportunities and risks report The aims of the risk management system implemented in the Schaltbau Group are, on the one hand, to identify existing risks at the earliest possible stage, to reduce business losses by means of suitable measures and to avoid any possible danger to the Group s goingconcern status. The second objective of the risk management system is to identify opportunities and make good use of them. The Group has integrated the risk management system in its corporate workflows. This strategy serves to actively combat risks and make the most of any opportunities that may arise. From this standpoint, risk management thus plays a crucial role in achieving the Group's financial objectives and safeguarding sustainable added value. The risk management system, with its organised structure and workflow organisation, is described and defined in groupwide corporate guidelines. It includes a comprehensive system of documentation and reporting. Apart from quarterly reports that cover the entire range of risks and any possible opportunities, an inhouse ad hoc report is immediately prepared as soon as any key changes are made or any new information is received. Review meetings take place regularly, in which all risk and opportunityrelated topics as well as the current economic situation are discussed and compared with the corporate forecast, the previous year's situation and the rolling forecast. Market trends, changes within the competition and development projects are also considered and analysed. The focus of the monthly reviews is generally forwardlooking. Their aim is to recognise and safeguard future potential for the Group. The Executive Board of Schaltbau Holding AG, the Group Controlling department and the management of the various subsidiaries are responsible for maintaining the risk management system. The external auditor tests the functionality and suitability of the system each year. 28

29 MANAGEMENT REPORT Description of the essential charcteristics of the internal control and risk management system with regard to the Group financial reporting process ( 289 (5) and 315 (2) 5 HGB) The objective of the internal control system for financial reporting within the Schaltbau Group and for Schaltbau Holding AG is to ensure that the accounting records are maintained properly and that the relevant statutory regulations are complied with. The system ascertains that the transactions are fully, promptly and correctly recorded, processed and documented in accordance with statutory regulations, the Articles of Incorporation and inhouse guidelines. Accounting documents must be correct and complete, inventory counts properly conducted, assets and liabilities appropriately recognised, presented and measured in the financial statements, so that timely, reliable and complete information can be provided at all times. Standardised lines of communication are in place between Schaltbau Holding AG and its subsidiaries. The powers of the managing directors of the individual Group entities are governed by terms of reference. For their part, the managing directors of the subsidiaries also exercise a control function in their companies by means of standardised flows of information. Supervisory bodies such as boards of directors are also in place. The accounting and financial reporting systems employed are protected from unauthorised access by appropriate IT systems. Standard software is utilised wherever possible to operate accounting and financial reporting systems. Guidelines are in place at Group level and for each of the subsidiaries, setting out the work to be performed and the scope of permitted activities. The areas of responsibility within the accounting and financial reporting functions are clearly regulated and organised to ensure an appropriate segregation of duties. The dual control principle is applied throughout the financial reporting process. Any accounting data received or forwarded are tested continuously for completeness and accuracy. The software systems used within the Group also include plausibility checks. Rules and regulations relevant for authorisation and approval processes have been implemented in the authorisation concepts for all relevant IT applications (signature regulations, bank powers of attorney, etc.). The Group s understanding of the conduct required of its employees is set out in a corporate Code of Conduct. Accounting department employees, many of whom have worked for many years for the Group, are appropriately qualified. General training measures (e.g. current IFRS developments) and individualised training courses ensure that the employees involved have the appropriate sets of skills to perform their work. The various accounting departments are all situated locally and the Group has decided against using shared services or relocating functions in order to ensure proximity to operations and hence better quality. The monthly figures of each of the Group's companies are reviewed for plausibility by the Group Controlling department or at the monthly meetings of Executive Board and local managing directors held to discuss the figures. All processes relevant for financial reporting are regularly tested by the Group s external auditors. The latter communicate their findings to management and monitor implementation of the measures proposed and agreed upon. A multiyear, riskoriented audit plan is in place. 29

30 MANAGEMENT REPORT The external auditor is also required, as part of the audit work performed, to report to the Supervisory Board any risks relevant for financial reporting and control weaknesses as well as any weaknesses in the risk management system and internal control system that are identified during the audit. Macroeconomic and industryspecific risks An oligopolistic demand structure characterises both the rail and the bus industries. The number of potential customers is therefore limited. These structures lead to a high degree of market transparency, which can result in strong price competition and downward pressure on selling prices. The Schaltbau Group counters these risks by making the most of its underlying innovative strength. R&D activities help to create new products and ensure that existing products are enhanced in the best interests of customers. A further important aspect of avoiding risk is the intensive management of customer relationships. As market leader on both the German and the European markets, Bode is directly dependent on the business performance of bus manufacturers and their demand behaviour in a volatile market situation. Bode is countering this risk by expanding its Door Systems for Railway Vehicles product group and broadening its international customer base as part of a targeted strategy. At the same time, Bode can boast a highly flexible manufacturing organisation, selective customer support and a high rate of innovation. The Group's performance, particularly in the Rail Infrastructure business field, is both directly and indirectly dependent on investment levels of the German national railway company Deutsche Bahn AG and on public spending behaviour in general. Cutbacks in public spending can have a negative effect on business performance, whereas the opposite is true in the event of additional public funds being made available. These irregular cycles can give rise to fluctuations in levels of business. In order to limit the resulting risks, Schaltbau Group entities are stepping up their international activities. Industrial goods business is also being expanded, bringing with it a broader customer base and the opportunity to exploit new fields of application. The acquisition of Bubenzer in 27 was fully in line with these objectives. The upheavals on capital markets as a result of the worldwide financial crisis had a highly negative impact on the world economy in 29. Although the situation eased somewhat during the second half of the year, the danger is not yet completely over, as numerous indicators of economic performance worldwide still showed signs of instability at the beginning of 21. Events such as Greece s potential insolvency could quickly lead to a domino effect capable of triggering the next crisis if assistance is not forthcoming. Against this background, it cannot be ruled out that the volume of railway industry orders and those from public authorities could also be negatively affected. Similarly, it is not possible to predict the duration of such a crisis or the extent of its impact on the Schaltbau Group s performance. One factor that is taking on increasing significance in international business is the political call for localised production or socalled local content. An increasing number of orders are being awarded subject to fulfilment of this condition. The Schaltbau Group reacted to this trend at an early stage by establishing an international presence through its local subsidiaries. The resources of an organisation the size of the Schaltbau Group are, however, limited and only allow a selective approach. 3

31 MANAGEMENT REPORT Operational risks Specific operational risks to companies of the Schaltbau Group exist in the areas of development and design, procurement and production. Optimised cost structures in production combined with high quality and indepth market and customer knowledge are designed to avoid incorrect allocations of resources in the field of development and ensure a transparent timetomarket process. Within the valueadded process the Group s companies run the risk of business interruption, quality problems or risks posed by industrial safety and environmental risks. These risks are minimised by the utilisation of comprehensive guidelines and procedural regulations regarding quality management, product and industrial safety. 31

32 MANAGEMENT REPORT The effects of raw material price rises can be partly compensated by longterm supply agreements, groupwide centralisation of material requirements or by passing on price increases to customers. It is not possible, however, to fully compensate for significant increases in purchase prices. Working in the opposite direction, the strategy of putting longterm supply agreements into place means that the Group can only benefit from falling purchase prices after a time delay. Business processes are highly reliant on the support of IT systems. The companies of the Schaltbau Group take both technical and organisational precautions to reduce risks with regard to availability, confidentiality and reliability. Legal risks Legal risks can arise from customer reclamations, guarantee claims, legal disputes, patent law infringement and claims for damages. Latent risks are covered by insurance policies or by provisions in the balance sheet. Losses may arise, however, that are either not sufficiently insured or exceed the amount of provision recognised. Product piracy also represents an additional risk, particularly on Asian markets. Processing and supplying these markets and working together with local partners also increase the risk of selective knowhow drift. Explicit contractual restrictions in the transfer of technical knowhow and the rapid development of new products and processes help to preserve the Group's technical edge. Financing risks The financing of the Schaltbau Group is relatively complex due to the history of restructuring with various consortiumbased financing arrangements within the cash pool. In this situation, it no longer made sense to prolong the cash pool. A bridging loan is currently in place in the cash pool, based on the previous arrangement, which is valid until 31 March 21 (see: "Significant events after the balance sheet date"). Longerterm financing arrangements are likely to involve more expensive conditions. The newly defined covenants are also likely to entail a higher compliance risk than those applicable under the current financing arrangements. Restrictions in credit approvals may also have an impact on our customers and suppliers. This could have a negative impact on the recoverability of receivables or on purchasing. Both of these aspects are continually monitored. The Group s subsidiaries in China involve a high degree of working capital typical for that country, entailing correspondingly high financing requirements that result in unused potential. The Group has taken the risk of rising interest rates into account by entering into various longterm interestrate hedges for a total nominal amount of originally 19.5 million. Financing for the acquisition of Pintsch Bubenzer is hedged with an interest swap for a nominal amount of 4.1 million. A creditpool credit volume of 3. million (as at 31 December 29) is hedged by interestrate swaps for a nominal amount of 9. million. A further swap for a nominal amount of 6. million is also in place to refinance the participation rights in 214. A crosscurrency swap was also concluded in 29 to hedge the interest/currency risk relating to a euro loan held by a foreign subsidiary (hedged volume at 31 December 29: 1.5 million). The market value of the interest swaps fluctuates, depending on changes in relevant interest rates. Currency risks are solely managed using marketable instruments that hedge underlying transactions. All transactions denominated in foreign currencies are hedged. The devaluation of other currencies against the euro can impair competitiveness in certain sales regions. We are tackling this problem on a longterm basis by improving productivity and ensuring geographical diversification such that the Group can remain competitive, irrespective of the currency in which it does business. Despite difficult business conditions, no risks have been identified that pose a threat to the goingconcern status of the Group. Opportunities Due to their longterm investment approach, the economic environment of the railways and public transport systems is far less subject to market fluctuations than that of privatesector industry. The service and financing agreement (LuFV) in place between Deutsche Bahn AG and the German Federal Ministry of Transport is an additional stabilising factor. The agreement covers the funds necessary to modernise the existing railway infrastructure and comprises annual expenditure of 2.5 billion up to the year 213. This provides continuity in funding compared to previous years, making it significantly easier to predict future order volumes in the railway sector. As part of its economic stimulus packages I and II, the German Federal Government is also providing a further 1.3 billion for investments in railway infrastructure for 29 and 21. Schaltbau s innovative strength, consistently reinforced by high R&D expenditure and an international approach to operations, also opens up a great number of opportunities. Even in difficult economic times, the Group s operational 32

33 MANAGEMENT REPORT companies are capable of generating additional demand on markets by means of regular product innovations. The fastgrowing wind power market continues to present good prospects for the future. These opportunities are currently being used in the form of new lighting products and a complete range of braking systems for windpower plants. Activities in this promising sector are likely to provide impetus for the Group s performance in 21. Worldwide market opportunities are highly promising for the Compact Allround Drive System (CADS), which was presented as a prototype at the IAA Commercial Vehicles 28 and has meanwhile been completed with a new electric drive system for outswinging plug doors. Work is now underway to bring the CADS system to market and series production maturity. The interest shown by customers is a good indication that the new systems have considerable market potential. Executive Board compensation system The compensation of the Executive Board comprises both fixed and variable components. The variable component consists of a management bonus based on the change in Group net profit. There are no variable components based on longterm incentives such as stock options. A pension plan is not in place. Criteria for assessing the appropriateness of compensation are: the tasks performed by each individual member of the Executive Board, his or her personal performance, the economic situation, the degree of success and also the future prospects of the Group as compared to its competitors. Explanatory Report of the Executive Board on the information required pursuant to 289 (4) HGB / 315 (4) HGB (German Commercial Code) 1. The subscribed capital comprises the following: a share capital of 6,85,34.88, divided into 1,871,668 bearer shares (shares without nominal value). 2. The Executive Board is not aware of any limitations regarding voting rights or the transfer of shares. 3. The only major shareholders owning either a direct or an indirect share of capital exceeding 1% of the voting rights are the Cammann family, which owns 11.81% and the Zimmermann family, which owns 1.9% of the Company s shares (as at 31 December 29). 4. There are no shareholders with special controlling rights. 5. There are no voting right controls relating to shares held by employees of the Articles of Incorporation of Schaltbau Holding AG deals with the composition, appointment and removal of the Executive Board. The Executive Board comprises two or more persons. The Supervisory Board appoints the Executive Board members and determines their number. It has the power to appoint a member of the Executive Board to be Chairman of the Executive Board, to appoint deputy members to the Executive Board and stipulate rules of procedure for the Executive Board. The Supervisory Board is also responsible for revoking the appointment of Executive Board members. The Annual General Meeting decides on any changes to the Articles of 33

34 MANAGEMENT REPORT Incorporation. The only exception is that the Supervisory Board is authorised to make changes that only affect the wording of the Articles of Incorporation. 7. In 27 the Executive Board and the Supervisory Board submitted a proposal to the Annual General Meeting to authorise the Company up to 8 December 21 to buy back a maximum of 1% of the share capital in place at the date of the resolution for purposes other than trading. The Annual General Meeting concurred with this proposal. No Schaltbau shares were bought back during the fiscal year 29. Subject to the approval of the Supervisory Board, the Executive Board is additionally authorised to increase share capital by up to 3,294,. before 11 June 213 by issuing new shares in return for cash or noncash contributions, either in a single step or in several steps. The Executive Board may decide to exclude subscription rights with the approval of the Supervisory Board. Furthermore, the Company's share capital can be conditionally increased by up to by issuing up to 64 new bearer shares (Conditional Capital I). The conditional capital increase serves to safeguard the granting of option rights, which, due to the authorisation resolution passed at the Annual General Meeting on 19 December 23, are issued together with participation rights. Subject to the approval of the Supervisory Board, the Executive Board is authorised to stipulate further details regarding the implementation of the conditional capital increase. Furthermore, the Company's share capital can be conditionally increased by up to 1,82,.88 by issuing up to 497,268 bearer shares (common stock) (Conditional Capital II). The conditional share capital increase may only be used to grant shares to the bearers of convertible or option bonds issued by the Company in accordance with the authorisation given at the Annual General Meeting on 1 July 25. In accordance with the conditions laid down for convertible bonds, Conditional Capital II may also be used to issue shares to bearers of convertible bonds with conversion obligations. The conditional share capital increase will only be implemented insofar as the bearers of the option or convertible bonds issued by the Company up to 3 June 21 in accordance with the authorisation resolution taken on 1 July 25 exercise their conversion or option rights or if the bearers of convertible bonds fulfil their obligation to convert their bonds, with the consequence that treasury shares do not have to be used in order to fulfil these rights. There were no conversions of convertible bonds into shares during the fiscal year 29. As a general rule, the new shares participate in profit as of the beginning of the fiscal year in which they arise through the exercising of the bearers' conversion or option rights. Subject to the approval of the Supervisory Board, the Executive Board is authorised to stipulate further details regarding the implementation of the conditional capital increase. In accordance with the authorisation given at the Annual General Meeting on 12 June 27, Conditional Capital II may also be used to grant shares to the holders of participation rights with conversion and option rights (supplementary shareholders' resolution). 8. Schaltbau Holding AG's main loan agreements include changeofownership clauses. These clauses allow creditors extraordinary cancellation rights in the event of the majority of the shares being transferred. 9. The Company has not concluded any compensation agreements, either with members of the Executive Board or with employees, regarding employment termination in the event of a takeover offer. CORPORATE GOVERNANCE STATEMENT IN ACCORDANCE WITH 289a OF THE GERMAN COMMERCIAL CODE (HGB) Principles of Corporate Governance and cooperation between the Executive Board and the Supervisory Board Schaltbau is fully committed to a high standard of responsible, transparent corporate governance. This approach is intended to foster the trust of investors, employees, business partners and the public in the management and monitoring of the Company. The guidelines contained in the Schaltbau Group s Code of Conduct set out minimum standards of conduct that are binding for all Schaltbau Group employees worldwide. The complete Code of Conduct is published on the Schaltbau Holding AG website. The main principles of Corporate Governance are presented in the Corporate Governance Report, which is included in the Annual Report. 34

35 MANAGEMENT REPORT Shareholders and Annual General Meeting The shareholders of Schaltbau Holding AG exercise their rights at the Annual General Meeting. The Annual General Meeting takes place once a year within the first eight months of the following fiscal year. The Chairman of the Supervisory Board chairs the Annual General Meeting, which then decides on the tasks for which it is responsible. The agenda, directions on how to get there and information on voting proxies are published on the Company website in good time with the aim of making participation in the Annual General Meeting of Schaltbau Holding AG as straightforward as possible for shareholders. The shareholders can also obtain proxy voting forms from the website with which to designate an authorised proxy for the Annual General Meeting, who is obliged to vote in accordance with the shareholder s instructions. Supervisory Board In accordance with 8 (1) of the Articles of Incorporation, the Supervisory Board of Schaltbau Holding AG comprises six members. One third of these are employee representatives and the remaining two thirds represent shareholders. The shareholder representatives are elected at the Annual General Meeting and the staff representatives are elected by employees. The Supervisory 35

36 MANAGEMENT REPORT Board elects its chairman from among its members. The Supervisory Board has a fiveyear term of office. The last regular election of the Supervisory Board took place at the Annual General Meeting held on 7 July 26. The Supervisory Board appoints the members of the Executive Board. The Supervisory Board both monitors and advises the Executive Board in the governance of the Company s affairs. The Executive Board requires the approval of the Supervisory Board for major decisions. The Supervisory Board meets at regular intervals four times a year. It examines the Company Financial Statements and the Consolidated Financial Statements and, on this basis, adopts the Company Financial Statements and approves the Consolidated Financial Statements. The Supervisory Board of Schaltbau Holding AG currently has a Personnel Committee, consisting of the members HansJakob Zimmermann, Dr. Stefan Schmittmann and Marianne Reindl. The Chairman of the Supervisory Board is also Chairman of the Personnel Committee. In the past, the contracts of service and the structure of the compensation system for the members of the Executive Board were reviewed and determined by the Personnel Committee. In accordance with the new statutory regulations, the full Supervisory Board has now taken over this responsibility. No other committees exist within the Supervisory Board. An Audit Committee has been provided for under the Supervisory Board s rules of procedure, but has not been formed, however, in view of the size of the Supervisory Board. No further committees were appointed, particularly in view of the fact that procedures are in place to ensure a consistent flow of corporate and other relevant information to all members of a sixperson Supervisory Board. Executive Board The Executive Board manages the business under its own responsibility. It reports regularly, promptly and comprehensively to the Supervisory Board in both written and oral reports on business performance, corporate strategies, fundamental issues relating to financial, investment and personnel policies as well as on the profitability and the risk situation of both Schaltbau Holding AG and the Schaltbau Group. A D&O insurance policy has been taken out for the members of the Executive and Supervisory Boards. A deductible has been contractually agreed upon for the members of the Executive Board with effect from the beginning of 21. Financial reporting and external audit The Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards (IFRS). The Consolidated Financial Statements are submitted by the Executive Board, audited by the external auditors and examined and approved by the Supervisory Board. The Consolidated Financial Statements are made accessible to the public. The external auditor reports to the Supervisory Board on any significant findings and events resulting from the external audit that could be of relevance for the work of the Supervisory Board. The Chairman is informed if the external auditor detects facts that point to an inaccuracy with respect to the Declaration of Compliance submitted by the Executive Board and the Supervisory Board in accordance with 161 of the German Stock Corporation Act (AktG). Transparency Schaltbau Holding AG utilises its website ( to provide information to shareholders and investors promptly. In addition to the Annual Report, which also includes the Corporate Governance Report and Interim Financial Reports, shareholders and third parties are additionally kept informed of the latest developments by means of ad hoc announcements and press releases. Schaltbau Holding AG publishes a financial calendar displaying all important dates and corporate publications well in advance. In accordance with 1 of the Securities Prospectus Act (WpPG), all publicly listed companies are annually required to provide the public with a document containing all information published or otherwise made public by them within the preceding twelve months in compliance with corporate or capital market regulations. The "Annual Document" can be downloaded at: Declaration of Compliance pursuant to 161 AktG as at 2 December 29 Declaration of the Executive Board and the Supervisory Board of Schaltbau Holding AG regarding the recommendations of the "Government Commission on the German Corporate Governance Code" pursuant to 161 AktG ("Declaration of Compliance") The Executive Board and the Supervisory Board of Schaltbau Holding AG issued the last Declaration of Compliance with the German Corporate Governance Code pursuant to 161 AktG on 11 December 28. The following declaration relates to the version of the Code dated 6 June 28 and published on 8 August 28 in the electronic Federal Gazette for the period 36

37 MANAGEMENT REPORT from 11 December 28 to 5 August 29. For the period from 6 August 29 onwards the following declaration relates to the recommendations of the Code contained in the version dated 18 June 29 and published on 5 August 29 in the electronic Federal Gazette. The Executive Board and the Supervisory Board of Schaltbau Holding AG hereby declare that the recommendations of the "Government Commission on the German Corporate Governance Code" have been and are being observed, with the following exceptions: Re 3.8: Schaltbau Holding AG is principally not of the opinion that the degree of motivation and responsibility with which the members of the Executive Board and the Supervisory Board perform their duties will be enhanced by the introduction of a deductible. The D&O insurance policy taken out for the benefit of the Supervisory Board will thus remain without provision for a deductible. In future, the Executive Board contracts of service will include a deductible for Executive Board members in accordance with regulations inasmuch as no right of continuance has been agreed upon. Re 4.2.2: Until now, the contracts of service and the structure of the compensation system for the members of the Executive Board were reviewed and determined by the Personnel Committee. According to the new regulations, the full Supervisory Board will take over this responsibility from now on. Re 4.2.3: There is no plan to introduce stock option models as variable compensation components for Executive Board members. Longterm incentives for the Executive Board should 37

38 MANAGEMENT REPORT continue to be primarily achieved by means of variable compensation components that relate to the extent of Group profits. Thus the compensation of individual Executive Board members consists solely of fixed and successoriented components because the Supervisory Board is of the opinion that stock option models are only limitedly suitable as an incentive for the Executive Board. Until now, variable compensation components did not include a longterm assessment basis because no provision was made for them by law and ambitious performance targets can also be determined using annual performance data. In future, the service contracts of Executive Board members will include variable compensation components in compliance with statutory regulations, which at least also include a longterm assessment basis, assuming there is no right of continuance. The contracts of service for Executive Board members do not include payment arrangements either pertaining to the premature termination of their positions in the Executive Board or termination resulting from a change of control. Thus in case of premature termination of a position in the Executive Board, the necessary flexibility is retained to allow an appropriate agreement to be reached in keeping with the particular situation. Information on the basic features of the compensation system was not scheduled for the Annual General Meeting due to the detailed explanation in the compensation report, but will, however, be included in future. Re / 4.2.5: The total compensation of each member of the Executive Board will not be disclosed as a result of the resolution taken at the Annual General Meeting on 7 July 26. Re 5.1.2: Due to the function of Schaltbau Holding AG as holding company, the number of staff members it employs is limited. For this reason, a longterm succession plan primarily based on the selection of potential internal successors is not practicable. In view of the current ages of the Executive Board members and the terms of their appointments, there is currently no age limit in place for Executive Board members. Re 5.2 / 5.3: The Supervisory Board has formed a Personnel Committee. An Auditing Committee has been provided for under the rules of procedure of the Supervisory Board, but has, however, not been formed due to the total size of the Supervisory Board. No further committees were appointed, particularly in view of the fact that a consistent flow of all company and other relevant information to all members of a 6person Supervisory Board is eminently achievable. Re 5.4.6: The compensation of Supervisory Board members is stipulated in the company's Articles of Association and specifically explained in the compensation report contained both in the Group Management Report and in the Corporate Governance report. For this reason, further disclosure of individual compensation is not currently provided for. Membership in committees is not taken into account in the compensation of Supervisory Board members because there are currently no other committees apart from the Personnel Committee. 38

39 MANAGEMENT REPORT Re 7.1.2: A specific review does not take place between the Executive Board and the Supervisory Board prior to the publication of halfyearly or quarterly financial reports. The assets, financial and profitability situation is regularly reviewed within the framework of Supervisory Board meetings and whenever the need arises on the strength of monthly reporting to the Supervisory Board. The Executive Board sees this as the only way to preserve the flexibility required for legal reasons, particularly in the case of subject matter relevant to ad hoc publicity. Due to the international structure of the Group and the resulting complexity, the Group financial statements and the interim reports have not been made publicly accessible within 9 days after the end of the fiscal year or 45 days after the end of the reporting period. Outlook The economy has continued to recover during the first months of 21. The economic upturn that originated mainly in Asia during the second half of 29 and particularly in China has, based on the assessment of economists, gained in strength. This trend is also benefiting the countries of the European Union, for which Eurostat predicts a GDP growth rate of.7% for 21. At 1.2%, the forecast for Germany is slightly higher. According to the OECD outlook, developments on the European labour market could slow down the recovery. Unemployment is not expected to reach its highest point until the end of 21 or the beginning of 211. The general insecurity caused by the high increase in public debt as a result of the crisis is an additional factor. Fears that a state could become bankrupt were additionally exacerbated at the end of 29 and the beginning of 21 by the difficulties Greece and Dubai were facing to repay debt. Budgetary discipline and hence lower spending and investment will clearly have to become an elementary part of the policies of many countries. Accounting for 55% of sales in 29, the railway industry is the most important sales market for the Schaltbau Group. Due to the long duration of projects, the visibility of expected orders is high. With the exception of China, the impact of statefunded economic stimulus programmes in this sector has not yet become perceptible. Despite the continued high requirement for rolling stock and infrastructure, Schaltbau forecasts constant or even slightly reduced spending in the European railways sector during the next few years as the pressure to reduce state debt is bound to make itself felt. By contrast, investments in public transportation in other regions of the world are likely to increase or at least remain at the levels seen in 28, particularly in Asia and the USA. For this reason the Schaltbau Group will continue to push ahead rigorously with its strategy of international expansion in the coming years. Considering the continued difficult business environment, the Schaltbau Group got off to a good start in 21. The trend towards recovery seen during the final quarter of 29 continued in the first months of the current year. As a result, the orderintake for the first quarter 21 is expected to surpass the figure recorded for the fourth quarter 29. Within the Stationary Transportation Technology segment, the Rail Infrastructure business field is reporting good growth in terms of incoming orders. The Brake Systems business field, however, will continue to suffer from the continuing reluctance to invest in worldwide container traffic, at least during the first half of 21. The first major order for brake systems for wind power plants will have a positive impact on future business performance. The moderate recovery in industrial demand for components is continuing at both national and international levels. Despite these positive factors, an improvement in sales revenue will follow on from the improved orderintake figures seen in the first quarter 21 with a time delay. Due to the long winter period, the delivery of products for Rail Infrastructure projects has been delayed, in some cases into the second and third quarters of 21. Based on orderintake to date and information gathered from the various markets, the Schaltbau Group is abiding by the forecasts made in November 29, namely that Group sales in 21 will be at a similar level to 29. However, the Group will have to be prepared to perform upfront work in 21 in order to achieve the growth targeted for 211. This strategic approach is likely to lead to a reduction in the result from operating activities (EBIT) to approximately 17.5 million. Group net profit for the year is forecast at 11.6 million and earnings per share at 5.4. International business in the railway sector is expected to remain stable during the fiscal year 211. The Schaltbau Group is forecast to register growth in its industrial goods business. Profitability is therefore expected to improve in

40 MANAGEMENT REPORT Schaltbau Holding AG forecasts a significantly lower net profit for 21 than that reported for the fiscal year 29. Whereas 29 benefited from income from the reversal of a previously recognised impairment loss, the year 21 will be negatively impacted by the implementation of the Financial Reporting Modernisation Act (BilMoG), particularly as a result of the measurement of pension provisions. For the fiscal year 211, it is likely that the growing profitability of its subsidiaries will have a positive impact on Schaltbau Holding AG s net profit. The mediumterm prospects for the Schaltbau Group are favourable. The mobility of the world's population will continue to increase. Environmental aspects will tend to become increasingly important. Railways are a highly efficient form of transportation in this regard. They are a far cleaner solution than road, air and sea and the only method of mass transportation in this decade that can be driven using renewable energy. An additional argument is the lower amount of space required. Highways take up three times as much land area as highspeed train lines per kilometre of distance covered. In view of evergreater urbanisation, these aspects are likely to become increasingly important. This process is likely to accelerate, particularly in the emerging markets of Asia and Latin America. New metropolises will come into being that will have to be connected to each other by the fastest means possible. Railway transportation is the ideal solution to these challenges. Parallel to these major trends, the flow of goods will also continue to increase. Good infrastructure will become an increasingly important factor, particularly for countries with emerging economies. It is therefore safe to assume that investments in these lines of business are likely to grow strongly. Apart from organic growth, the continuing internationalisation of the markets in which the Schaltbau Group operates also provides takeover opportunities. The Group continues to follow this acquisition strategy as an additional driver of growth, always, however, in wellthoughtout and measured steps. On the back of its great innovative strength, the Schaltbau Group intends to reinforce its position on sales markets. Other disclosures This Management Report contains facts and forecasts that reflect the future performance of the Company and Group based on the assessment of the Executive Board of Schaltbau Holding AG. These assessments are considered to be realistic for the purposes of this report. It is, however, possible that assumptions may prove to be incorrect or that unforeseen risks and uncertainties arise. For this reason, the actual outcome may differ to expectations. This may be due to a number of reasons, such as changes in the business and economic environment, for example, major changes in project business or in the investment behaviour of customers. Munich, 29 March 21 The Executive Board 4

41 MANAGEMENT REPORT 41

42 SCHALTBAU SHARE The Schaltbau share International stock markets got off to a bad start in 29. The steep downward trend that began in September 28 after the collapse of the American investment bank Lehman Brothers continued into the first months of the year under report. The government stimulus packages already put together in 28 seemed to have little initial impact. In March 29, however, the negative trend was finally reversed. Surprisingly resilient consumer demand and the unexpectedly minor impact of the crisis on the labour market as well as positive reports from numerous companies helped share prices recover from the lows seen in February and March 29 and rally strongly during the further course of the year. Nevertheless, stock market developments remained extremely volatile throughout the entire year. DAX and SDAX staged strong recovery in 29 After the major slump of almost 4 per cent in 28, the German share index (DAX) continued its decline at the beginning of 29. Starting at 4,973 points on the first day of trading, after a brief recovery in February the DAX fell rapidly to its lowest point of the year of 3,666 points on 6 March 29. In an initial reaction to an oversold market, share prices again recovered strongly, although developments were extraordinarily volatile in the face of continuing uncertainty. The upward trend became somewhat more stable on the back of some very convincing firstquarter figures published by several major US banks and an unexpectedly vigorous US labour market in July. A yearend rally boosted the DAX to its highest level of the year, recording 6,12 points on 29 December, despite the difficulties experienced by Greece and Dubai with their loan repayments. One day later the DAX closed the year 29 at 5,957 points and thus almost 2 per cent above the level seen on the first day's trading. The SDAX, the index which includes the 5 socalled Small Caps and follows the MDAX in terms of stock exchange turnover and market capitalisation, showed a similar progression. After starting the year at 2,837 points, the SDAX displayed a similar downturn and stood at 2,163 points on 9 March, its lowest level for the year. The months that followed were marked by revived market euphoria until well into October, only experiencing a slight setback around the middle of the year. On 2 October the SDAX climbed to reach its annual high of 3,63 points. On 3 December the SDAX closed at 3,549 points, 25 per cent up for the year. Thus the thirdtier shares clearly outperformed the DAX in 29. Schaltbau asserts itself well after a volatile year The Schaltbau share was unable to benefit adequately from the generally positive stock market performance. However, the fact that the share was only relatively slightly affected by the impact of the financial crisis the previous year should be taken into account. In line with the market as a whole, the Schaltbau share price fell quite sharply during the first months of 29. After starting at 38.8 on the first day of trading, the price had fallen to 26.5 by 2 March. The positive business figures for 28 published shortly beforehand and the announcement of a higher dividend of 5 cents per share (previous year: 3 cents) formed the basis for a sharp rise in the price of the Schaltbau share with a short burst of speed at the beginning of June to reach a high for the year of on 8 June

43 SCHALTBAU SHARE January February March April May June July August September October November December Profittaking, however, soon forced the Schaltbau share price back below the 4 mark. The price then proceeded to fluctuate within a narrow range between 35 and 4. Although the Schaltbau Group is among those which react late to economic cycles, positive halfyear and thirdquarter reports reiterating the earnings forecast for 29 failed to give the share price any tangible impetus. Even the additional earnings of approximately.8 million or 4 cents per share generated by the sale of the Group's 49 per cent stake in the Chinese company Beijing Bode Transportation Equipment Co. Ltd failed to make an upward impact. The Schaltbau share finished the year at a price of 39.,.5 per cent above that recorded on the first day of trading. SDAX now in sight At the balance sheet date on 31 December 29 the share capital of Schaltbau Holding AG amounted to 6,85,34.88, divided into 1,871,668 shares. The company holds 5, of its own shares. Thus the situation has not changed since the previous year. The reclassification of the Schaltbau share by the German Stock Exchange is of considerable importance for the future. Since June 29 Schaltbau has had the SDAX within its sights. The company had been previously classified as a technology share, which meant the next index target would have been to enter the TecDAX. The reclassification has considerably improved the chances of the Schaltbau share being promoted to one of the German stock market's selection indices as the difference to the index stocks in terms of relevant criteria such as market capitalisation and trading volume has thus become narrower. A total of 92,429 Schaltbau shares were traded in the fiscal year 29. Altogether, 596,538 fewer Schaltbau shares were traded than in the previous year. The market value fell even more noticeably to 32.1 million due to the lower average share price over the year after recording 62.5 million the previous year. Schaltbau was ranked 98th in terms of the MDAX/SDAX criterion trading volume at the end of December 29 and 18th in terms of market capitalisation. Shareholder structure remains largely unchanged There were only minor changes in the shareholder structure during the year under report. The Cammann family, i.e. SATORA Beteiligungs GmbH increased its stake in Schaltbau Holding AG by approximately.2 percentage points to approximately 11.8 per cent. The Zimmermann family continued to hold 1.1 per cent of Schaltbau Holding AG stock at Shareholder structure* 11.81% Family of Dr. Cammann (Satora / private) 1.9% Zimmermann family 5.35% Golden Peaks Capital Management 3.52% IFOS Internationale Fonds Service AG 69.23% Free float * Stockholdings subject to report as at 31 December 29 43

44 SCHALTBAU SHARE the end of 29. Golden Peaks Capital Management Ltd reduced its stockholding in Schaltbau back to the level seen at the end of 27, i.e. approximately 5.4 per cent. In 28 Golden Peaks surpassed the tenpercent threshold for a short time and still held 9.5 per cent of Schaltbau stock at the end of that year. Furthermore, the company is aware of 17 shareholders from various investment companies who cumulatively hold approximately 19.2 per cent of Schaltbau stock. These include IFOS Internationale Fonds Service AG, which has held 3.5 per cent of Schaltbau Holding AG stock since September 27 according to voting rights announcements. Continued commitment in investor relations work Schaltbau Holding AG's commitment in the field of investor relations remains undiminished, particularly in view of the difficult economic environment. Apart from the high degree of transparency required for membership in the Prime Standard segment, the company continues to maintain an open and active dialogue with both shareholders and investors. In this respect, apart from the obligatory publication of Directors' Dealings, ad hoc and voting rights announcements, investors were again swiftly and reliably informed concerning the latest developments and events by means of press releases in both German and English throughout the fiscal year 29. The broadening of the shareholder base continued to be one of the main focuses of the company's investor relations activities. These efforts were principally directed towards asset managers in the Germanspeaking region as well as Small Caporiented investors, mainly in western Europe. The most important measures in this respect took the form of road shows and participation in analyst and investor conferences such as the German Equity Forum, at which the Executive Board took the opportunity to present the Schaltbau Group and its future prospects to key investment decisionmakers in numerous personal discussions. All information is promptly published on the Group's internet website at: This also includes information on Directors' Dealings, current financial dates, analysts' assessments, voting results concerning the resolutions of the Annual General Meeting, the current price of Schaltbau stock and developments in shareholder structure. Interested parties can also visit the "Download" section to access business and interim reports as well as further extensive information on the Schaltbau Group. Xetra, closing prices Highest Lowest Endofyear price Earnings per share (undiluted) Earnings per share (diluted) Number of shares 1,871,668 1,871,668 1,868,936 Share capital m Market capitalisation as at 31 December m Trading volume. all exchanges/xetra m Shares traded 92,429 1,516,967 1,911,832 44

45 SCHALTBAU SHARE 45

46 CORPORATE GOVERNANCE Corporate Governance Report of Schaltbau Holding AG, Munich Corporate Governance at Schaltbau Schaltbau is fully committed to a high standard of responsible corporate governance. The German Corporate Governance Code stipulates guidelines for achieving this aim and makes the corporate governance system both transparent and comprehensible. Both the Executive Board and the Supervisory Board of Schaltbau Holding AG have always been aware of their responsibility for a transparent style of corporate governance and control aimed at sustainable growth in company value. For this reason they emphatically endorse the recommendations contained in the German Corporate Governance Code and see them as an additional opportunity to improve the performance of the Company and cement the trust of its shareholders, business partners and staff. The following Corporate Governance Report serves to summarise the essential principles of corporate governance crucial for the governance of Schaltbau Holding AG. Furthermore, Schaltbau Holding AG has also issued a Corporate Governance Statement in accordance with 289a of the German Commercial Code (HGB). General information regarding management structure Schaltbau Holding AG is subject to the regulations enshrined in the German Stock Corporation Act, the OneThird Participation Act and the capital market regulations as well as the provisions laid down in the Articles of Incorporation and the rules of procedure governing the actions of both the Executive Board and the Supervisory Board. Schaltbau Holding AG is governed by a dual management and monitoring structure consisting of two bodies: the Executive Board and the Supervisory Board. The Executive Board and the Supervisory Board are both committed to and aware of their duty to safeguard the best interests of both the shareholders and the Company as a whole. The Annual General Meeting is the third body of the Company. Executive Board The Executive Board of Schaltbau Holding AG (currently consisting of two members) manages the Company and conducts its commercial operations. The Executive Board is responsible for the strategic orientation of the Schaltbau Group, for preparing and determining financial planning and also for monitoring both the company's participating interests and financing throughout the Group. It performs these duties in close cooperation with the Supervisory Board. Furthermore, the Executive Board is responsible for preparing the reports required by law such as company and group financial statements as well as interim reports. It also ensures that appropriate risk management measures are in place, including the internal control system, and reports regularly, promptly and comprehensively to the Supervisory Board on all questions of strategy relevant to the Group, corporate planning, business performance, financing, risk management and compliance. Matters subject to the approval of the Supervisory Board are defined in the Executive Board's rules of procedure. Responsibilities within the Executive Board are governed by an organisational chart. The activities of the Executive Board are geared towards longterm, sustainable growth in company value. Supervisory Board In accordance with 8 clause 1 of the Articles of Incorporation, the Supervisory Board of Schaltbau Holding AG comprises six members. One third of these are staff representatives and the remaining two thirds represent shareholders. The shareholder representatives are elected at the Annual General Meeting and the staff representatives are elected by the members of the staff. The Supervisory Board has a fiveyear term of office. The last regular reelection of the Supervisory Board took place at the Annual General Meeting held on 7 July

47 CORPORATE GOVERNANCE The Chairman performs the external duties of the Supervisory Board. The Supervisory Board both monitors and advises the Executive Board in business matters. The Supervisory Board holds regular discussions with the Executive Board regarding strategy and its implementation, planning, current business performance, the risk situation and topics related to compliance. It adopts the annual budget and Company Financial Statements of Schaltbau Holding AG and approves the Consolidated Financial Statements with due consideration to the written and oral reports supplied by the external auditors. The Supervisory Board is also responsible for appointing and removing Executive Board members. The Supervisory Board of Schaltbau Holding AG currently has one Personnel Committee consisting of three members. The Chairman of the Supervisory Board is also Chairman of the Personnel Committee. In the past, the contracts of service and the structure of the compensation system for the members of the Executive Board were reviewed and determined by the Personnel Committee. In accordance with the new statutory regulations, the full Supervisory Board will take over this responsibility from now on. In view of the size of the committee, the Supervisory Board refrained from forming either a Nomination Committee or an Audit Committee. Further committees can be formed as the need arises. There are no former members of the Executive Board on the Supervisory Board. The Supervisory Board may adopt resolutions provided that a minimum of four members take part in the procedure. Resolutions may be adopted by means of a simple majority. If the number of votes on both sides is equal, the Chairman of the Supervisory Board has the casting vote. Based on its own assessment, the Supervisory Board has a sufficient number of independent members. The effectiveness of the Supervisory Board is subject to annual review. There were no indications of conflicts of interest on the part of Supervisory Board members during the year under report. The Executive Board and the Supervisory Board cooperate closely and in an atmosphere of trust to safeguard the best interests of Schaltbau Holding AG. Please see the Report of the Supervisory Board for supplementary information regarding the main focus of cooperation between the Executive Board and the Supervisory Board. Annual General Meeting The shareholders exercise their right to vote at the Annual General Meeting. Schaltbau Holding AG has voting stock only. Each share entitles its holder to one vote. The Annual General Meeting takes place once a year within the first eight months of the fiscal year. The agenda of the Annual General Meeting is published on the Company's website, including all of the necessary reports and documents pertaining to it. The Annual General Meeting makes decisions in all matters empowered to it by law, with particular regard to the use of unappropriated profit, the election of the Supervisory Board, the ratification of the actions of the members of both the Executive Board and the Supervisory Board, the appointment of the external auditors, changes to the Articles of Incorporation and corporate activities. Every shareholder has the right to participate in the Annual General Meeting. In order to facilitate the exercising of their individual rights, Schaltbau Holding AG gives shareholders the option to vote via a company proxy who is bound to vote in accordance with their instructions at the Annual General Meeting. The invitation to the Annual General Meeting includes an The Supervisory Board consists of the following persons: Shareholder representatives KarlUwe van Husen Peter Jahrmarkt (Deputy Chairman) Dr. Stefan Schmittmann Hans Jakob Zimmermann (Chairman) Staff representatives Marianne Reindl Horst Wolf 47

48 CORPORATE GOVERNANCE explanation as to how voting instructions can be given prior to the meeting. Shareholders can, however, also be represented by a proxy of their choice. The registration and legitimation procedure complies with the legal and customary international "record date" procedure. Shareholders must legitimate their participation at the Annual General Meeting at least 21 days in advance. Financial reporting and risk management, external audit The Consolidated Financial Statements of Schaltbau Holding AG are prepared in accordance with International Financial Reporting Standards (IFRS). The Company Financial Statements of Schaltbau Holding AG are prepared in accordance with the German Commercial Code (HGB). Both the Consolidated and Company financial statements were audited by KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, as elected at the Annual General Meeting in accordance with a proposal made by the Supervisory Board. The Chairman of the Supervisory Board issued the audit engagement letter after assuring himself of the impartiality of the external auditors prior to putting forward the proposal at the Annual General Meeting. The Chairman of the Supervisory Board also came to an agreement with the external auditors to the effect that they immediately report to the Supervisory Board all significant findings and events resulting from the external audit. The risk management system implemented in the Schaltbau Group is designed with the dual purpose of detecting or anticipating risks at an early stage in order to avoid losses to the company on the one hand and of making conscious use of any business opportunities that present themselves on the other. The risk management system, including the accountrelated internal control system, and the specific risks to the Group are described in detail in the opportunities and risks report, which is part of the Group Management Report. Transparency Schaltbau Holding AG utilises the company website in order to provide shareholders and investors with prompt information: www. schaltbau.de. In addition to the annual report and various interim reports, shareholders and third parties are additionally kept informed of the latest developments by means of ad hoc announcements and press releases. Schaltbau Holding AG publishes a financial calendar displaying all important dates and company publications well in advance. In accordance with 1 of the Securities Prospectus Act (WpPG), all publicly listed companies are annually required to provide the public with a document containing all information published or otherwise made public by them within the preceding twelve months in compliance with company or capital market regulations. The "Annual Document" can be downloaded at: www. schaltbau.de. Directors' dealings, major participations and shareholdings subject to notification in accordance with number 6.6 of the German Corporate Governance Code Notifications regarding the transactions of members of management in accordance with 15a of the Securities Trading Act (WpHG) In accordance with Securities Trading Act (WpHG) regulations, Schaltbau Holding AG promptly discloses any notification of directors dealings in accordance with 15a WpHG, i.e. any notification involving members of the Executive Board, the Supervisory Board or any individuals who perform management functions in the legal sense of 48

49 CORPORATE GOVERNANCE 15a WpHG as well as any persons or legal entities closely related to any of the above mentioned with regard to the purchase or sale of Schaltbau Holding AG stock. These reports are also published on the Company's website at: Major voting rights in the company The Company promptly publishes any notifications received regarding the purchase or sale of major participations in accordance with 21 of the Securities Trading Act (WpHG) or pertaining to the holding of respective financial instruments in accordance with 25 WpHG. Shareholdings of Executive Board and Supervisory Board members Members of the Executive Board and the Supervisory Board hold the following Schaltbau Holding AG stock (WKN 7173) or related financial instruments (WKN ATFWY) either directly or indirectly through related individuals or companies: Stock option programmes and similar securitiesrelated incentive systems Schaltbau Holding AG does not currently have a stock option programme or any such similar securitiesrelated incentive system in place. In 29 an individual share subscription programme was offered to a selected circle of employees with special entitlements, which primarily relates to the chief executive officers of German group companies. The share subscription programme will be repeated in 21. Compensation of Executive Board and Supervisory Board (Compensation Report) The compensation system at Schaltbau Holding AG is based on the principles of performance and results and stands for a corporate culture of mutual service. The compensation of the Executive Board comprises both fixed and performancerelated components. The fixed components consist of a basic salary and benefits in kind. The performancerelated compensationcomponents comprise annually recurring components which depend on the development of Group net profit. A pension plan is not currently in place. Criteria for the appropriateness of the compensation include the individual tasks of the Executive Board members, their personal performance, the performance of the Executive Board as a whole, the economic situation, the success and the future prospects of the business taking the market environment into consideration, the customary amount of the compensation and the compensation structure in view of the wage and salary structure both within the enterprise itself and in other companies of comparable size within the same industry. The compensation structure is oriented on the basis of sustainable corporate development. The variable compensation components contained in the new Executive Board contracts of service are based on longterm assessment and include regulations providing for an appropriate reduction if the business situation were to worsen to such an extent as to render continued payment of the compensation unfair. Furthermore, the compensation components are limited to a maximum amount. Person subject to report Position Shareholding at 31 Dec. 29 Convertible bonds at 31 Dec. 29 Dr. Jürgen Cammann Spokesman of the Executive Board 221,1 768 Stck. ( 76,8.) Hans Jakob Zimmermann Chairman of the Supervisory Board 188,786 7,92 Stck. ( 792,.) Peter Jahrmarkt Deputy Chairman of the Supervisory Board 2, 45 Stck. ( 4,5.) 49

50 CORPORATE GOVERNANCE In the past, the contracts of service and the structure of the compensation system for the members of the Executive Board were reviewed and determined by the Personnel Committee. In accordance with the new statutory regulations, the full Supervisory Board will take over this responsibility from now on. In accordance with the resolution passed at the Annual General Meeting held on 7 July 26, the compensation of individual members of the Executive Board will not be publicly disclosed. Compensation for the active members of the Executive Board totalled 943, for the fiscal year 29. The compensation includes payments in kind resulting from the use of company vehicles calculated in accordance with taxation guidelines. The tax on these payments in kind is paid individually by each of the members of the Executive Board. In legal terms, the contracts of service for the members of the Executive Board do not contain any arrangements pertaining to the termination of their positions in the Executive Board that differ greatly to those applicable to employees. The total compensation received by former members of the Executive Board and their surviving dependents amounted to 94, in 29. Pension provisions totalling 574, (IFRS) are recognised at 31 December 29. Loans were not granted to members of either the Executive Board or the Supervisory Board during the fiscal year 29. The basic compensation for a Supervisory Board member totals 15, per annum. The Chairman of the Supervisory Board receives twice this amount and the Deputy Chairman receives oneandahalf times this amount. This results in basic compensation totalling 112,5 in 29. The Supervisory Board receives additional compensation if the dividend distributed to shareholders exceeds 4% of share capital. The dividend paid in 29 was above this level and for this reason a total of 24, was paid out. Membership of committees is not separately compensated. In accordance with the Articles of Incorporation, one member of the Supervisory Board received 12,3 for additional time spent on behalf of the company in 29. The Company has taken out a D&O insurance policy for the members of its Executive and Supervisory Boards. In view of the amount of compensation paid to the members of the Supervisory Board, a deductible has not been provided for. A deductible has been contractually agreed upon for the members of the Executive Board as of 21. Declaration of Compliance in accordance with 161 of the Stock Corporation Act (AktG) The Declaration of Compliance, required to be issued annually by the executive and supervisory boards of publicly listed companies in accordance with 161 AktG, was last issued on 2 December 29 and is an integral part of the Corporate Governance Statement, which is in turn an integral part of the Management Report. Munich, April 21 The Executive Board The Supervisory Board 5

51 CORPORATE GOVERNANCE 51

52 EXPLANATORY REPORT OF THE EXECUTIVE BOARD Explanatory Report of the Executive Board of Schaltbau Holding AG on the information required pursuant to 289 (5) and 315 (2) no. 5 HGB Legal background The Financial Reporting Modernisation Act (BilMoG) which came into force on 29 May 29 has, among other things, resulted in amendments to 289 and 315 of the German Commercial Code (HGB) as well as to 12 and 175 of the German Stock Corporation Act (AktG). Under the new regulations, the Executive Management is required to present a written report to shareholders at the Annual General Meeting on the new mandatory disclosures in the management report (pursuant to 289 (5) HGB) and in the group management report (pursuant to 315 (2) no. 5 HGB) relating to the internal control and risk management systems as relevant for the individual entity and group financial reporting processes. Subsequent to the coming into force of this legislation, the Shareholder Directive (ARUG) has been transformed into German Law. This later legislation incorporates the requirements for Explanatory Reports into 176 (1) AktG and revokes the provisions previously contained in 12 (3) sentence 2 and 175 (2) sentence 1 AktG. However, neither the reference to 289 (5) HGB (added in conjunction with BilMoG) nor the management report disclosures on the internal control and risk management systems, as relevant for financial reporting processes, have been included in the new act. It is not clear at present whether this is merely an editorial error and whether there is still a requirement to present an Explanatory Report on the information required pursuant to 289 (5) HGB and 315 (2) no. 5 HGB now that the Shareholder Directive has come into force. As a precautionary measure, the Executive Board of Schaltbau Holding AG has decided to present such a report for the fiscal year 29. Object of report According to the explanatory memorandum attached to BilMoG, an internal control system (ICS) covers the set of principles, procedures and measures taken to ensure that financial reporting systems are functioning effectively, economically and properly and that relevant regulations are complied with. This also includes the internal audit function to the extent relevant for financial reporting. The internal control system relevant for financial reporting covers the control and monitoring processes in place to manage accounting and financial reporting risks, in particular those relevant for commercial accounting purposes. Main characteristics of internal control and risk management relevant for financial reporting processes The main characteristics of the internal control and risk management systems as far as they relate to individual entity and group financial reporting processes can be described as follows: The Schaltbau Group has clearly defined organisational, corporate and control/monitoring structures; Groupwide planning, reporting, controlling and early warning monitoring systems/processes are in place to ensure comprehensive analysis and appropriate management of risk factors that could have a bearing on earnings or that could endanger the goingconcern status of the Group and its entities; 52

53 EXPLANATORY REPORT OF THE EXECUTIVE BOARD Functions relevant for the financial reporting process (e.g. accounting and controlling) are clearly delineated; IT systems used for accounting and financial reporting purposes are protected against unauthorised access; Standard software is utilised in most cases to operate accounting and financial reporting systems; An appropriate internal reporting system (including groupwide risk management guidelines) is in place and revised when necessary; The departments involved in financial reporting processes meet the necessary requirements, both in quantitative and qualitative terms; The dual control principle is applied consistently throughout all processes relevant for accounting and financial reporting. The main processes relevant for financial reporting are regularly tested by the Group s external auditors. The Group s external auditors assess the effectiveness of the early warning monitoring system in accordance with 317 (4) HGB; The Supervisory Board considers, amongst its various other duties, the execution and effectiveness of the internal control system relevant for financial reporting as well as risk management within the Group. The objective of the internal control system for financial reporting within the Schaltbau Group, as described above, is to ensure that the accounting records are maintained properly and that the relevant statutory regulations are complied with. It is ascertained that the transactions are fully, promptly and correctly recorded, processed and documented in accordance with statutory regulations, the Articles of Incorporation and inhouse guidelines. The clearly defined organisational, corporate and control/ monitoring structures as well as appropriate staffing levels and other resources provide the basis for the relevant departments to execute their work efficiently. Clear instructions and guidelines throughout the Group ensure that the financial reporting process is working properly and consistently. Clearlydefined control mechanisms in areas relevant for accounting and financial reporting purposes, testing by the Group s external auditors and early identification of risks with the aid of the risk management system ensure that financial reporting by Schaltbau Holding AG and all other entities included in the consolidated financial statements is appropriate and in compliance with legal requirements. 53

54 ANNUAL DOCUMENT Annual Document in accordance with 1 of the Securities Prospectus Act (WpPG) In accordance with 1 clause 1 of the Securities Prospectus Act (WpPG), Schaltbau Holding AG is required to publish a socalled "Annual Document" at least once a year. The document must either include or make reference to all information that Schaltbau Holding AG has published or made available to the public in accordance with the regulations listed in 1 clause 1 of the Securities Prospectus Act (WpPG). Schaltbau Holding AG has established a special "Annual Document" category on its internet website " in the "Investor Relations" section, under which all publications in accordance with 1 clause 1 of the Securities Prospectus Act (WpPG) have been collated. This information is available as follows: Ad hoc releases category: Investor Relations/Ad hoc release Directors' dealings category: Investor Relations/ Corporate Governance/Directors' dealings Voting Rights announcements category: Investor Relations/ Annual Document Total Voting Rights announcements category: Investor Relations/ Annual Document No changes in the total number of voting rights were published in the fiscal year 29. Interim reports category: Investor Relations/ Financial information Annual report including consolidated financial statements and management report category: Investor Relations/ Financial information Consolidated financial statements and management report of Schaltbau Holding AG category: Investor Relations/ Financial information Invitation to Annual General Meeting category: Investor Relations/ Annual General Meeting Agenda of Annual General Meeting category: Investor Relations/ Annual Document Dividend announcement category: Investor Relations/ Annual Document Convertible bonds announcement category: Investor Relations/ Annual Document There were no issues of convertible bonds during the fiscal year 29. Announcement in accordance with 3b clause 1 sentence 1 number 2 of the Securities Trading Act (WpHG) category: Investor Relations/ Annual Document No announcements were published in accordance with 3b (1) sentence 1 No.2 of the Securities Trading Act (WpHG) in the fiscal year 29. Announcement in accordance with article 4 clause 4 VO (EG) No. 2273/23 category: Investor Relations/ Annual Document No announcements were published in accordance with Art. 4 (4) VO (EG) No. 2273/23 in the fiscal year 29. Advance announcement in accordance with 37v, 37w, 37x Securities Trading Act (WpHG) category: Investor Relations/ Annual Document 54

55 ANNUAL DOCUMENT 55

56 SCHALTBAU GROUP Consolidated Income Statement of Schaltbau Holding AG, Munich for the Fiscal Year 1 January 31 December 29 Disclosures in Notes Sales 2. Change in inventories of finished goods and work in progress 3. Own work capitalised 4. Total output 5. Other operating income 6. Cost of materials 7. Personnel expense 8. Amortisation and depreciation 9. Other operating expenses 1. Profit from operating activities Result from atequity accounted investments 11. Results from investments a) Interest income b) Interest expense 12. Finance result 13. Profit before tax 14. Income taxes (1) (2) (3) (4) (5) (6) (7) (8) 269,769 9,141 1, ,76 5,35 132,387 81,729 6,131 28,196 1, ,355 4,191 15,941 79,358 5,969 26,545 28,425 2,319 21,853 2,39 2, ,783 5,78 16,92 (9) 2, ,587 6,374 15,84 2, Group net profit 14,92 13,72 Analysis of group net profit attributable to minority shareholders attributable to the shareholders of Schaltbau Holding AG Group net profit Earnings per share undiluted Earnings per share diluted 1,743 1,229 12,349 11,843 14,92 13,72 (1) Transition from Group net profit to comprehensive income of Schaltbau Holding AG, Munich 1 January 31 December 29 Disclosures in Before tax Tax effect After tax Before tax Tax effect After tax Group net profit Translation differences Derivative financial instruments Total income and expenses recognised directly in equity Comprehensive income of which: attributable to minority shareholders attributable to the shareholders of Schaltbau Holding AG , , , ,

57 SCHALTBAU GROUP Consolidated Cash Flow Statement of Schaltbau Holding AG, Munich 1 January 31 December 29 Disclosures in Group net profit for the year Amortisation and depreciation on noncurrent assets Gain on disposal of noncurrent assets Finance result Income tax expense Change in current assets Change in provisions Change in current liabilities Dividends received Interest paid Interest received Income taxes paid Other noncash income / expenses Cash flows from operating activities Payments for investments in: Property, plant and equipment and intangible assets Financial investments (excluding cash acquired) Proceeds from disposal of: Property, plant and equipment Cash flows from investing activities Share buyback Dividend payment Distribution to minority interests Repayment of / proceeds from financial liabilities Cash flows from financing activities Change in cash and cash equivalents due to exchange rate fluctuations 14,92 6, ,78 13,72 5, ,374 2,828 2,733 8,315 2, ,41 12,855 4,58 1, ,548 5, ,96 1,93 2, (a) 16,214 13,3 (b) 8, ,766 6,296 2,3 31 8, ,44 1,447 5,593 (c) 3,251 7, Change in cash, cash equivalents and securities 3,174 2,552 Cash and cash equivalents at the end of the year Cash and cash equivalents at the beginning of the year Notes ,56 5,332 5,332 7,884 3,174 2,552 57

58 SCHALTBAU GROUP Consolidated Balance Sheet of Schaltbau Holding AG, Munich as at 31 December 29 ASSETS Disclosures in Notes A. NONCURRENT ASSETS I. Intangible assets II. Property, plant and equipment III. Atequity accounted investments IV. Other investments V. Deferred tax assets (11) (11) (11) (11) (9) 13,622 12,222 41,337 4,27 4,217 6,484 2,346 1,56 8,886 9, 7,48 69,482 B. CURRENT ASSETS I. Inventories II. Trade accounts receivable III. Income tax receivables IV. Other receivables and assets V. Cash and cash equivalents (12) (13) (13) (13) (14) 41,116 53,343 37,814 33, ,947 6,686 8,56 5,332 97,48 98,

59 SCHALTBAU GROUP EQUITY AND LIABILITIES Disclosures in Notes A. EQUITY (15) I. Subscribed capital (16) 6,85 6,85 II. Capital reserves (17) 8,443 8,443 III. Statutory reserves (17) IV. Revenue reserves (17) 13,162 23,98 V. Reserve for income/expenses recognised directly in equity (17) VI. Revaluation reserve (17) 3,41 3,41 VII. Group net profit attributable to shareholders of Schaltbau Holding AG 12,349 11,843 VIII. Equity attributable to shareholders of Schaltbau Holding AG 17,586 6,214 IX. Minority interests (18) 2,934 2,395 2,52 8,69 B. NONCURRENT LIABILITIES I. Participation rights capital II. Pension provisions III. Personnel related accruals IV. Other provisions V. Financial liabilities VI. Other liabilities VII. Deferred tax liabilities (19) (2) (21) (21) (22) (22) (9) 7,26 7,2 18,856 18,987 4,593 4, ,452 41, ,549 6,281 66,871 78,881 C. CURRENT LIABILITIES I. Personnel related accruals II. Other provisions III. Income taxes payable IV. Financial liabilities V. Trade accounts payable VI. Advance payments received VII. Other liabilities (21) (21) (22) (22) (22) (22) (22) 4,618 5,48 15,835 14, ,779 13,415 15,152 19,83 9,964 14,592 1,53 13,157 8,497 8, , ,124 59

60 SCHALTBAU GROUP Consolidated Statement of Changes in Equity of Schaltbau Holding AG, Munich Disclosures in Attributable to shareholders of Schaltbau Holding AG Note: Rounding differences may arise due to the use of electronic rounding aids. Subscribed capital Capital reserves Statutory reserves Revenue reserves Revaluation reserve Balance at ,84 8, ,658 3,41 Profit brought forward 7,198 Shares issued Dividend paid 559 Other changes 195 Group net profit for the year Income and expenses recognised directly in equity 694 Comprehensive income 694 Balance at ,85 8, ,98 3,41 Balance at ,85 8, ,98 3,41 Profit brought forward 11,843 Dividend paid 933 Group net profit for the year Income and expenses recognised directly in equity 164 Comprehensive income 164 Balance at ,85 8, ,162 3,41 6

61 SCHALTBAU GROUP Minority interests Group equity Reserve for income/expenses recognised directly in equity Net profit for the year Total in capital and reserves in net profit for the year Total 176 7,198 4,189 1, ,79 2,11 7, ,44 1,44 1, ,843 11,843 1,229 1,229 13, ,843 11, ,229 1,36 12, ,843 6,214 1,166 1,229 2,395 8, ,843 6,214 1,166 1,229 2,395 8,69 11,843 1,229 1, ,139 1,139 2,72 12,349 12,349 1,743 1,743 14, ,349 12, ,743 1,678 13, ,349 17,586 1,191 1,743 2,934 2,52 61

62 GROUP NOTES Notes to the Consolidated Financial Statements of Schaltbau Holding AG, Munich for the Fiscal Year 29 DESCRIPTION OF BUSINESS Schaltbau Holding AG is a listed stock corporation based in Munich, Germany. The Schaltbau Group is one of the leading manufacturers of traffic technology components and equipment. In addition to electromechanical components and equipment, the Group supplies door systems for buses and trains, safety systems for level crossings, equipment for railway vehicles, point heating systems, maritime aids and industrial braking systems. Its innovative and futureoriented products make Schaltbau a highly influential business partner in the area of traffic technology and for specific industrial applications. BASIS OF PREPARATION The consolidated financial statements of Schaltbau Holding AG, Munich, have been prepared in accordance with International Financial Reporting Standards (IFRS), as endorsed by the European Union (EU), and the additional requirements of the German Commercial Code pursuant to 315 a (1) HGB. All IFRSs issued by the International Accounting Standards Board (IASB) in London, United Kingdom, applicable at the balance sheet date and endorsed by the EU, and all Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) that were mandatory for the fiscal year under report have been applied (see also the disclosures made below on Standards, Interpretations and Amendments issued but not yet applied ). Items which have been combined in the consolidated balance sheet and consolidated income statement in order to improve clarity of presentation are analysed in the Notes and explained as necessary. The income statement is classified using the type of expenditure format. The reporting currency is the euro, rounded up or down to full thousands ( s). The consolidated financial statements and group management report drawn up for the fiscal year ending on 31 December 29 were approved for publication by the Executive Board on 29 March 21. The consolidated financial statements and group management report will be posted in the Electronic Federal Gazette. To ensure greater transparency and understanding, the company financial statements of Schaltbau Holding AG are reported separately to the consolidated financial statements. The full annual financial statements of Schaltbau Holding AG will be provided on request. CONSOLIDATION PRINCIPLES The financial statements of the companies included in the consolidated financial statements of Schaltbau Holding AG have been drawn up to 31 December using uniform accounting policies. In accordance with IFRS, all business combinations are accounted for using the purchase method. The purchase price paid for a subsidiary is allocated to the acquired assets, liabilities and contingent liabilities. Measurement is based on values applicable at the date on which the Group gained control over the subsidiary concerned. Assets, liabilities and contingent liabilities that are required to be recognised are measured at their full fair value, irrespective of the Group s shareholding. Any remaining debit difference (excess of cost over the fair value of acquired assets and liabilities) is presented as goodwill. Credit differences (excess of the fair value of acquired assets and liabilities over cost) are recognised immediately as income. In subsequent periods, fair value adjustments are rolled forward in accordance with the treatment of the corresponding assets and liabilities. In the event that writedowns have been recognised in the separate company financial statements on the cost of investment of consolidated companies or on intragroup receivables, these writedowns are reversed in the consolidated financial statements. Intragroup receivables, payables, income and expenses are eliminated on consolidation. 62

63 GROUP NOTES Intragroup profits on goods sold or services provided, gains and losses on sales of tangible and intangible assets and on intragroup provisions are also eliminated with income statement effect (net of the related deferred taxes). When additional shares of subsidiaries are acquired, the difference between the purchase price and the Group s share of the subsidiary s equity are offset against group revenue reserves. A subsidiary is deconsolidated when Schaltbau Holding AG ceases to have control over it. Investments accounted for using the equity method are stated at the Group s share of assets, liabilities and contingent liabilities (including fair value adjustments) plus, where applicable, any goodwill. Goodwill arising from the application of the equity method is tested for impairment at least once a year and is not amortised on a scheduled basis. CONSOLIDATED COMPANIES In principle, all subsidiaries and associated companies are required to be included in the consolidated financial statements. Subsidiaries are companies that are controlled by Schaltbau Holding AG and are fully consolidated. In addition to Schaltbau Holding AG, the following 8 (28: 8) German and 4 (28: 4) foreign companies are included in the Consolidated Financial Statements of Schaltbau Holding AG: Company Registered office Shareholding Gebr. Bode GmbH & Co. KG 1) Gebr. Bode & Co. Beteiligungs GmbH Gebr. Bode & Co. Verwaltungsgesellschaft mbh Pintsch Bamag Antriebs und Verkehrstechnik GmbH 1) Pintsch Aben B.V. Pintsch Aben geotherm GmbH 1) Pintsch Bubenzer GmbH 1) Schaltbau GmbH 1) Schaltbau France S.A.R.L. Alud Grundstücksverwaltungs GmbH & Co. Vermietungs KG Kassel Kassel Kassel Dinslaken Maarssen (NL) Dinslaken Kirchen Munich Argenteuil (F) Wiesbaden 1% 1% 1% 1% 1% 1% 1% 1% 1% 95% Xi an Schaltbau Electric Corporation Ltd. Xi an Shaanxi (P.R.CH) 5% Schaltbau Machine Electrics Ltd. Bredbury (UK) 1% 1) In accordance with 264 HGB and 264b HGB, these companies are exempted from the requirement to publish separate company financial statements and a management report. Associated companies are defined as companies over which Schaltbau Holding AG exercises significant influence and of which it holds between 2% and 5% of the shares. Associated companies are accounted for using the equity method. 63

64 GROUP NOTES The following associated companies are included in the consolidated financial statements at 31 December 29 using the equity method: Company Registered office Shareholding BoDo BodeDogrusan A.S. Schaltbau North America Inc. OLB Oberlandbahn Fahrzeugbereitstellungs GmbH KestelBursa (Turkey) Huntington (USA) Munich 5% 5% 49.8% The following subsidiaries are not consolidated on the grounds of materiality and are reported as other financial investments. Both individually and in aggregate they are in respect of the volume of their business not material for the fair presentation of the Group s net assets, financial and earnings position: Company Registered office Shareholding Machine Electrics Ltd. Trukaids Ltd. Direct Contact Ltd. Electrical Spare Parts & Accessories Ltd. Fabricon Ltd. Schaltbau Asia Pacific Ltd. Shenyang Schaltbau Electrical Corporation Ltd. Schaltbau India Pvt. Ltd. Shenyang Pintsch Bamag Transportation Energy Equipment Co. Ltd. Bubenzer Bremsen America LLC Bredbury (UK) Bredbury (UK) Bredbury (UK) Bredbury (UK) Bredbury (UK) Hong Kong (PRC) Shenyang (PRC) Thane (India) Shenyang (PRC) Flemington (USA) 1% 1% 1% 1% 1% 1% 75% 8% 1% 1% Shenyang Pintsch Bamag Industrial Brake Systems, Ltd. Shenyang (PRC) 1% My Port (M) Sdn. Bhd. Johor (Malaysia) 1% BubenzerMyPort Sdn. Bhd. Johor (Malaysia) 1% Bode Polska Sp.z.o.o. Rzeszow (Poland) 1% Rawag Sp.z.o.o. Rawicz (Poland) 2% GEZ Unterstützungsgesellschaft mbh Munich 1% Gebr. Bode & Co. Beteiligungs GmbH sold its 49 % shareholding in Beijing Bode Transportation Equipment Co. Ltd. in Peking (PRC) with effect from 9 December 29. This investment had previously been included in the consolidated financial statements at equity. With effect from 16 November 29, Pintsch Bubenzer GmbH acquired 1% of the shares of My Port (M) Sdn. Bhd. in Johor (Malaysia). The acquired entity holds 49% of the shares of BubenzerMyPort Sdn. Bhd., as a result of which the group s shareholding in that entity increased to 1%. On 17 September 29 Schaltbau GmbH set up a subsidiary under Schaltbau India Private Ltd. in Thane (India) and holds 8% of the shares of the new subsidiary since that date. The new subsidiary has not yet started operations. 64

65 GROUP NOTES On 13 August 29 Pintsch Bamag GmbH founded Shenyang Pintsch Bamag Transportation Energy Equipment Co. Ltd. as a 1% subsidiary. Gebr. Bode & Co. Beteiligungs GmbH founded Bode Polska Sp.z.o.o. in Rzeszow (Poland) on 18 June 29 and holds 1% of the shares of that entity. The new company does not yet have any business activities. As a result of the changes in the group reporting entity, the consolidated financial statements are not fully comparable with the previous year. The consolidated income statement for the previous year includes the results of Machine Electrics Ltd. only for the period from 1 August to 31 December 28; the sales figure reported for the Schaltbau Group in 28 would have been EUR 3,321, and earnings EUR 74, higher if this transaction had been completed with effect from 1 January 28. The sale of Beijing Bode Transportation Equipment Co. Ltd. (previously accounted for at equity) had a positive effect of EUR 1,35, on the result from investments in 29. In addition, the tax expense for the year includes an amount of EUR 2, relating to withholding taxes arising in conjunction with the sale. In the previous year, results from investments had included a negative contribution of EUR 1,261, from the investment in Beijing Bode Transportation Equipment Co. Ltd. USE OF ESTIMATES For the purposes of drawing up the consolidated financial statements, it is necessary to make estimates and assumptions which affect the carrying amounts of assets, liabilities and contingent liabilities at the balance sheet and the amounts of income and expense recognised in the period under report. Actual results can differ from estimates as a result of changes in the economic situation and due to other circumstances. Estimates and underlying assumptions are checked regularly. Corrections to estimates are recognised in the accounting period in which the estimate is reviewed. Goodwill is reported in the consolidated balance sheet as a result of business acquisitions. On the first consolidation on a newly acquired business, all identifiable assets, liabilities and contingent liabilities are recognised, measured at their fair value at the acquisition date. One of the main areas of estimation is therefore the determination of the fair values of those assets and liabilities at the relevant date. For the purposes of determining the fair value of assets and liabilities, independent valuation reports and internal computations using appropriate valuation methods were drawn up, generally involving a forecast of future expected cash flows. These valuations are dependent to a high degree on assumptions taken by management regarding future changes in value and on assumed changes in the discount factor applied. Other significant estimates relate to capitalised development costs, other provisions and pension provisions. FOREIGN CURRENCY TRANSLATION The financial statements of consolidated companies prepared in a foreign currency are translated using the functional currency concept. The financial statements of consolidated companies whose functional currency is not the Euro are drawn up in accordance with the modified closing rate method. Under this method, the balance sheet amounts of consolidated foreign companies are translated at the closing spot exchange rate prevailing at the balance sheet date. Income and expenses presented in the income statement are translated using average exchange rates for the year in question. Differences arising on translation are recognised directly in equity (see explanatory comments on the consolidated balance sheet, Note 17). Transactions denominated in a foreign currency are translated into the functional currency using the exchange rate prevailing at transaction date. In subsequent periods, foreign currency monetary items are translated at the closing rate and exchange differences recognised in the income statement. 65

66 GROUP NOTES Exchange rates relevant for foreign currency translation into Euro changed as follows: Chinese Renminbi Yuan US Dollar British Pound New Turkish Lira Closing rate Average rate ACCOUNTING PRINCIPLES AND POLICIES In accordance with IAS 1, the balance sheet is presented on the basis of the current/noncurrent distinction. Current assets and liabilities are those that fall due within a period of one year. Regardless of their maturity, inventories and trade accounts receivable/payable are also deemed to be current if they are sold, used or are due within the normal course of a business cycle (which can be longer than one year). Deferred tax assets and liabilities are presented as noncurrent items. Intangible assets with a definite useful life are measured at cost and amortised on a straightline basis over their expected useful lives. Concessions, licences, industrial trade marks and software are generally amortised over a period of 4 to 5 years. The carrying amount of these assets is reduced if the recoverable amount (defined as the higher of an asset s fair value less costs to sell and its value in use) is lower than the carrying amount. Intangible assets with an indefinite useful life and capitalised development costs are measured at cost. They are not subjected to systematic amortisation. Instead, they are tested for impairment annually (or more frequently if there is an indication that they are impaired) and, where necessary, the carrying amount is reduced to the recoverable amount. If the reasons for previously recognised losses no longer exist, those impairment losses are reversed. Goodwill arising on business acquisitions is not subjected to systematic amortisation. Instead, it is tested for impairment annually (or more frequently if there is an indication that goodwill is impaired). This is carried out at the level of the cashgenerating unit to which the goodwill was allocated. If the carrying amount of the cashgenerating unit exceeds its recoverable amount, goodwill is written down to the lower recoverable amount. Impairment losses recognised on goodwill are not subsequently reversed. The recoverable amount of a cashgenerating unit is determined on the basis of its fair value less costs to sell and is calculated using a discounted cash flow method. Computations are based on forecasts approved by the Management Board for the following threeyear period and which are also used for internal company purposes. A discount rate of 11% or 13% was applied. Research costs are recognised immediately as an expense. Development costs are capitalised if the technical feasibility of completing the intangible asset and its success on the market are assured. After market introduction of the newly developed products, capitalised development costs are amortised over their expected useful life. Property, plant and equipment are measured at acquisition or manufacturing cost, less scheduled straightline depreciation and impairment losses. The manufacturing cost of own manufactured assets comprise all costs directly attributable to the asset and an appropriate portion of indirect overheads. Items of property, plant and equipment are depreciated on a straightline basis over their expected useful lives. Moveable assets are generally depreciated using the straightline method. Impairment losses are determined, in accordance with IAS 36, by comparing the carrying amount of an asset with its recoverable amount. If the reasons for previously recognised losses no longer exist, those impairment losses are reversed. Depreciation is based on the following useful lives: buildings 1 to 5 years, plant and machinery/other equipment, office fixtures and fittings 2 to 15 years. Investment subsidies and grants received are generally offset against 66

67 GROUP NOTES the cost of the relevant asset, resulting in a subsequent lower depreciation expense. This is the case unless the overall circumstances require the subsidies and grants received to be recognised as liabilities. Current maintenance and repair costs are recognised as expense in the period in which they are incurred. Investments in nonconsolidated, affiliated companies and other participations presented in the balance sheet as investments are stated at the lower of cost or fair value at the balance sheet date. Interests in associated companies accounted for using the equity method are measured at the Group s share of equity plus goodwill. Noncurrent loans are stated at their amortised cost. In accordance with IAS 12 (Income Taxes), deferred tax assets and liabilities are recognised on timing differences between the accounting and tax bases of assets and liabilities, on consolidation procedures affecting net income and on tax losses available for carryforward. Deferred tax assets are only recognised if future tax reductions are probable. Tax losses available for carryforward are only taken into consideration to the extent that sufficient taxable income is expected in the future to enable the deferred tax asset to be realised. A corporation rate of 16 % and a trade municipal tax rate of 14 % (both unchanged from the previous year) have been used to measure deferred taxes for the Group s German companies. Deferred tax assets and liabilities have been adjusted accordingly. Deferred taxes for the Group s foreign companies are based on the tax rates applicable in the countries concerned. Inventories are measured at acquisition or manufacturing cost. Cost is determined using either the average or the FIFO (first in first out) method. The valuation of finished products and work in progress comprises all directly attributable material costs, payroll costs and production overheads, determined on the basis of the normal capacity of the production facilities. Financing costs are not included in acquisition or manufacturing cost. Inventories are written down at the balance sheet date if their net realisable value is lower than their carrying amount. A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets consist, in particular, of cash and cash equivalents, trade accounts receivable and other loans and receivables as well as financial assets (derivative or nonderivative) held for trading purposes. For all categories of financial assets, the criterion for recognising and derecognising such assets is the trading date, in other words the date on which the obligation to buy or sell the instrument was entered into. Financial liabilities generally involve a contractual obligation to deliver cash or another financial asset to another entity. This includes, in particular, trade accounts payable, liabilities to banks, finance lease liabilities and derivative financial liabilities. Financial assets and liabilities are recognised initially at their fair value. If a financial asset or liability is not valued through profit or loss at its fair value, transaction costs directly attributable to the acquisition of the financial asset or to the issue of the financial liability are included in the carrying amount. The fair value is defined as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. All nonderivative financial instruments are stated at their amortised cost. Derivative financial instruments are primarily employed as cash flow hedges to hedge foreign exchange risks arising from operations (forward exchange contracts), to hedge interest rate risks (interest rate swaps) and in one case to hedge an interest rate / currency risk (cross currency swap). The interest rate swaps and the cross currency swap are structured as cash flow hedges. In rare cases, commodity risks are hedged by means of forward commodity contracts. The Group applies hedge accounting for hedging relationships to hedge interest rate risks, interest rate / currency risks and other significant currency risks. All other derivative financial instruments are classified as held for trading. Derivative financial instruments are measured at their fair value which corresponds to the market value. The market value reflects the effect of closing out a derivative at the balance sheet date, regardless of the result arising on the underlying transactions. Due to the volatility of market data relevant for measuring the value of an instrument, the market value of a derivative financial instrument measured at the balance sheet date can differ from the amounts that will actually be realised. The market value of forward exchange contracts is calculated on the basis of the foreign exchange spot rates prevailing on the balance sheet date and on the basis of the amount of forward premiums and discounts payable in comparison with the contracted forward rate. Fair value gains and losses are recognised as other operating income or expenses. Forward exchange contracts are presented in the balance sheet under the headings Other receivables and assets" or Other liabilities. 67

68 GROUP NOTES The fair value of interest rate swaps and of the crosscurrency swap is determined on the basis of valuation models developed by the Group s banks; fair value gains and losses are recognised, net of deferred taxes, directly in equity (hedge accounting). The conditions for the application of hedge accounting are fulfilled in the form of a formal documentation of the relationship between the hedged item and the hedging instrument. Each hedging instrument highly effectively offsets the risk from the hedged item. This is measured prospectively using the dollar offset method and retrospectively using a hypothetical derivative. Trade accounts receivable and other receivables and assets are stated at their amortised cost less allowances for impairment. Allowances take the expected loss on receivables into account. In the event of actual losses, the relevant receivable is derecognised. The revaluation reserve comprises the amounts included directly in equity in conjunction with the fair value measurement of land. These amounts are determined as the difference between the expected market values of the plots of land concerned and their acquisition cost (net of deferred tax liabilities). The expected market values are either taken from reports of external property valuers or derived from benchmark tables for comparative plots of land drawn up by valuation committees on behalf of regional and local authorities. Pension provisions are recognised to cover oldage, invalidity and dependent survivors pension benefits promised by Group companies. Oldage pension benefits vary depending on economic circumstances and are based as a rule on the period of employment, the salary of an employee and the position held by the employee within the company. The obligation to pay pensions in the future lies with the individual company in question. Pension provisions are measured in accordance with IAS 19 (Employees Benefits) using the projected unit credit method. Under this method, not only obligations relating to known vested benefits at the reporting date are recognised, but also the effect of future increases in pensions and salaries. This involves taking account of various input factors which are evaluated on a prudent basis. The calculation is based on actuarial reports which take account of biometric assumptions. Actuarial gains and losses are only recognised as income or expenses when their net cumulative amount exceeds 1% of the obligations. In this case, they are recognised over the average remaining working lives of the relevant employees. Pension expense is recorded either as an interest or personnel expense, depending on the nature of the pension plan at the companies concerned. The service cost is reported as personnel expense and the interest component of the allocation to the pension provision is reported as part of the net interest result. The biometric tables issued by Prof. Dr. Klaus Heubeck (25G) were used as the basis for mortality probabilities. The interest rate applied to calculate pension provisions is based on current capital market interest rates. Other provisions are recognised when the Group has a present obligation to a third party as a result of a past event and it is probable that on outflow of resources will be required to settle the obligation. They are measured at the probable settlement amount, taking into account all identifiable risks, and are not offset against any recourse claims. Provisions are only recognised if the Group has a present obligation (legal or constructive) to a third party. Warranty provisions are measured on the basis of past warranty expenditure, the length of the warranty period and the volume of sales still subject to warranty. Specific warranty provisions are recognised for known damages. Provisions that contain an interest component are discounted using an appropriate market interest rate. Provisions for early retirement parttime working arrangements (based on work and workfree phases) are measured at their present value using actuarial principles. Whereas settlement arrears are recognised in instalments during the period of the agreements, topup amounts are recorded as obligation and expense as soon as the obligation arises. The interest component of the allocation to the provision is reported as personnel expense. Liabilities are stated at amortised cost measured using with the effective interest method. 68

69 GROUP NOTES Leases The beneficial ownership of leased items is attributed to the party that bears substantially all the risks and rewards incidental to ownership of an asset. If the lessor bears substantially all of those risks and rewards, the lease is classified as an operating lease, and the leased item is accounted for by the lessor. The leased item is measured in accordance with the accounting policies normally applied to such items. Lease instalments are recognised in profit or loss. The Group is only party to operating leases as the lessee. Contingent liabilities Contingent liabilities correspond to contingent obligations existing at the balance sheet date. Revenue recognition Revenue is recognised, net of sales deductions such as settlement discount, bonuses or rebates, when the significant risks and rewards of ownership of the goods are transferred to the buyer. Profit on sales is recognised when it is probable that the economic benefits associated with the transactions will flow to the Group. Borrowing costs With the exception of borrowing costs recognised as a component of the construction cost of qualifying assets, all interest and other borrowing costs are recognised immediately as expense. Standards, Interpretations and Amendments applied for the first time in the fiscal year under report As a result of IFRS 8 Operating Segments which was issued in November 26, segment reporting has been changed from the risk and reward approach (previously stipulated by IAS 14) to the management approach for the purposes of identifying segments. The information that is relevant in this context is the information that is reviewed regularly by an entity s chief operating decision maker. Measurement of segments has been changed from the financial accounting approach (IAS 14) to the management approach. IFRS 8 is mandatory for annual periods commencing on or after 1 January 29. The firsttime application of IFRS 8 in the consolidated financial statements of Schaltbau Holding AG results in changed disclosures for segment reporting. The change relates to the former Mobile Transportation Technology segment which has been split into two separate segments. The Components line of business was carved out completely and now operates as a separate segment. The Mobile Transportation Technology segment now covers the door systems line of business carried by the Bode Group. This comprises the product groups Door systems for Railway Vehicles, Door Systems for Buses and Fittings for Sliding Vehicle Doors. The new Components segment comprises the electromechanical components line of business of the Schaltbau GmbH Group. This covers the product groups Connectors, Snapaction Switches, Contactors and Railway equipment. The previous year s figures have been adjusted accordingly. In September 27, the IASB issued a revised version of IAS 1 Presentation of Financial Statements. The revised Standard is intended to make the analysis and comparability of financial statements easier for users. The revised Standard is mandatory for annual periods beginning on or after January 1, 29. The main impact of firsttime application of the Standard is the Statement of Income and Expenses Recognised in Equity presented in conjunction with the consolidated income statement. The IASB issued IAS 23 Borrowing Costs (revised) in March 27. Under this Standard, borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are required to be capitalised as part of the cost of the asset. The previous option to recognise borrowing costs immediately in profit or loss was removed. The revised Standard is mandatory for annual periods beginning on or after January 1, 29. The revised version did not have any impact on the consolidated financial statements of Schaltbau Holding AG. 69

70 GROUP NOTES In March 29, the IASB issued a revised version of IFRS 7 Improving Disclosures about Financial Instruments. The amendments relate primarily to disclosures on the determination of fair values and on liquidity risk. The disclosures on the determination of fair values now require the inclusion of an analysis for each class of financial instrument based on the threelevel fair value hierarchy based on the US GAAP Standard SFAS 157. The scope of disclosures has also been extended. The revised Standard is mandatory for annual periods beginning on or after January 1, 29. Firsttime application of the Standard mainly affects the requirement to report Disclosures on financial instruments in accordance with IFRS 7 in the consolidated financial statements of Schaltbau Holding AG. The IASB has published other financial reporting pronouncements which were required to be applied for the first time in the fiscal year 29, but which did not have a significant impact on the consolidated financial statements of Schaltbau Holding AG. Standards, Interpretations and Amendments issued but not yet applied Already endorsed by the EU: In June 29 the EU endorsed IFRS 3 Business Combinations (revised 28). The revised Standard sets out new rules for the application of the purchase method for business combinations. The principal changes relate to the measurement of minority interests, the recognition of business acquisitions made in stages and the treatment of conditional consideration and acquisitionrelated costs. Under the new rules, minority interests can be measured either at the fair value (the full goodwill method ) or at the fair value of the acquiring entity's share of identifiable assets and liabilities. In the case of business acquisitions made in stages, the fair value of the investment held at the date on which control passes must be remeasured through profit or loss. Any subsequent changes to conditional consideration that was recognized as a liability at the acquisition date must be recognized in future in profit or loss. Acquisitionrelated costs must be recognized as expense when incurred. The amended Standard is mandatory for annual periods beginning on or after 1 July 29. The EU also endorsed amendments to IAS 27 Consolidated and Separate Financial Statements (amended 28) in June 29. The principal amendments to this Standard deal with the accounting treatment of transactions which result in an entity either retaining or losing control over another entity. Transactions which do not result in the loss of control must be accounted for as equity transactions and do not have an impact on profit or loss. Any investment remaining at the date of loss of control must be measured at its fair value. It is also permitted to report negative balances for minority interests. In other words, in future, losses will be allocated without restriction on the basis of the proportionate share of the investment held. The amended Standard is mandatory for annual periods beginning on or after 1 July 29. The amendments are not expected to have an impact on the consolidated financial statements of Schaltbau Holding AG. In July 29 the EU endorsed IFRIC 16 Hedges of a Net Investment in a Foreign Operation. This Interpretation clarifies that it is only possible to account for hedging relationships between the functional currency of a foreign operation and the parent company s functional currency. The amount of the net assets of the foreign operation recognised in the consolidated financial statements can be hedged. The hedging instrument can then be held by any entity or entities within the group (other than the entity whose exchange rate risks are being hedged). When the foreign operation ceases to be part of the group reporting entity, the amount of the fair value gains and losses recognised on the hedging instrument directly in equity and the exchange differences recognised in the foreign currency translation reserve relating to the foreign operation are at that stage reclassified to profit or loss. The amount of cumulative exchange differences relating to the foreign operation that is being deconsolidated can be determined using the stagebystage or the direct method of consolidation. IFRS 16 is mandatory for annual periods beginning on or after 3 June 29. Earlier application is permitted. It is not expected that application of this Interpretation will have any impact on the consolidated financial statements of Schaltbau Holding AG. In September 29 the EU endorsed amendments to IAS 39 Eligible Hedged Items Amendment to IAS 39 Financial Instruments: Recognition and Measurement. The starting point for the amendments are the existing requirements whereby an entity can include the whole, a part or specific risks of a hedged item in a hedge. In order to simplify the requirements (without changing the underlying principles), the rules for designating the risk of inflation as a hedged item and for designating a onesided risk in a hedged item (for instance with an option as hedge) have been expanded. As far as the designation of the risk of inflation as a hedged item is concerned, it has been clarified that this 7

71 GROUP NOTES risk cannot generally be designated as a hedged risk. If, however, the inflation components are contractually agreed elements of cash flows relating to a financial instrument, the inflation component can be hedged. A onesided risk arises when an entity only designates changes in the cash flows or fair value of a hedged item above or below a fixed price or another variable. The amendment stipulates that the innate value of the option (but not the full value of the option comprising innate value and fair value) can be designated. If the whole value of the option were designated as a hedge of a onesided risk on a future transaction, this would represent hedge ineffectiveness, since only the hedge includes a fair value component. The amendments are mandatory for annual periods beginning on or after 1 July 29 and are not expected to have a significant impact on the consolidated financial statements of Schaltbau Holding AG. Earlier application is permitted. In December 29 the EU endorsed Amendment to IAS 32 Financial Instruments: Presentation: Classification of Rights Issues. The amendments set out the requirements for the accounting treatment of exercise rights, options and option warrants at the level of the issuer on the acquisition of a fixed number of equity capital instruments denominated in a currency other than the functional currency of the issuer. Previously, such instruments were required to be accounted for as derivative liabilities. In future, exercise rights will are issued proportionately to existing equity holders of an entity at a fixed currency amount must be classified as equity. In the currency in which the exercise price is denominated is irrelevant. The Amendment is mandatory for annual periods beginning on or after 1 February 21. It is not expected that these amemdments to IAS 32 will have any impact on the future consolidated financial statements of Schaltbau Holding AG. Not yet endorsed by the EU: In June 29 the IASB issued amendments to IFRS 2 Sharebased Payment: Group Cashsettled Sharebased Payment Transactions clarifying the accounting treatment of sharebased cashsettled remuneration within a group at the level of the separate financial statements of a subsidiary. With this amendment, some of the requirements previously contained in IFRIC 8 "Scope of IFRS 2" and in IFRIC 11 "IFRS 2 Group and Treasury Share Transactions" are now included in IFRS 2. The amended Standard is mandatory for annual periods beginning on or after 1 January 21. Earlier application is permitted. The Group does not expect that adoption of the revised version, if endorsed in its current form by the EU, will have a significant impact on the presentation of the consolidated financial statements. IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments was published by the IASB in November 29. It sets out the requirements of International Financial Reporting Standards (IFRS) if an entity either partially or in full extinguishes a financial liability by issuing shares or other equity instruments. The Interpretation stipulates that the equity instruments issued to a creditor to extinguish a financial liability represent a component of the consideration paid in accordance with IAS and that the corresponding equity instruments must be measured at their fair value. If the fair value cannot be measured reliably, the equity instruments must be measured at the fair value of the extinguished liability. The difference between the carrying amount of the financial liability to be derecognised and the firsttime carrying amount of the equity instruments issued must be recognised with income statement effect. IFRIC 19 is mandatory for annual periods beginning on or after 1 July 21. It is not expected that application of IFRIC 19 will have any impact on the future consolidated financial statements of Schaltbau Holding AG. In November 29 the IASB issued a new International Financial Reporting Standard relating to the classification and measurement of financial instruments, namely IFRS 9 Financial Instruments. This Standard represents the culmination of the first phase of a threephase project to replace IAS 39 Financial Instruments: Recognition and Measurement by a new Standard. IFRS 9 introduces new requirements for the classification and measurement of financial assets. The requirements are mandatory from 1 January 213 onwards. Earlier application is permitted. The Group is currently investigating whether adoption of the revised version, if endorsed in its current form by the EU, will have a significant impact on the presentation of the consolidated financial statements. The IASB has published several other pronouncements. Those pronouncemente recently endorsed by the EU and those not yet endorsed are either not relevant or will not have a significant impact on the consolidated financial statements of Schaltbau Holding AG. 71

72 GROUP NOTES Risk management and hedging activities Risk management for the entire Group is managed centrally by the parent company. Regulations regarding risk management policies, hedging activities and documentation requirements are laid down in guidelines issued by the corporate finance department and have been incorporated into relevant processes and procedures. The regulations are reviewed and updated at regular intervals. The guidelines are approved by the Executive Board. Derivative financial instruments are employed as a hedge against foreign currency risks and in individual cases as a hedge against commodity price and interest rate risk exposures. The Schaltbau Group does not hold derivative financial instruments for speculative purposes nor does it issue such instruments. At 31 December 29, the Group had 34 forward exchange contracts in place with banks (28: 53) for a total amount of US$ 14,232, (28: US$ 21,167,), to hedge cash flows with foreign customers. The forward exchange contracts, comprising US$ 14,137, (28: US$ 18,122,) for sales contracts and US$ 95, (28: US$ 3,45,) for purchase contracts and all fall due in 21 with the exception of one contract for US$ 352,. An unrealised loss of 56, (28: 594,) has been recognised for contracts with a negative fair value and an unrealised gain of 22, (28: 448,) has been recognised for contracts with a positive fair value. A cross currency swap running until 31 July 215 was put in place in 28 to hedge the interest rate and currency exposure of a Eurodenominated loan at the level of a foreign subsidiary. The contract, with a hedging volume of 1,525, (28: 1,775,), had a positive market value of 183, (28: 332,) at 31 December 29. The currency risk resulting from exchange rate risks is shown in the following table. Risks relating to other foreign currencies are not significant. The figures shown represent the impact of a 1% deterioration of each currency shown against the Euro (compared with the balance sheet date). The impact of the hedging transactions described above is not taken into account in this presentation. 72

73 GROUP NOTES Foreign currency risk Disclosures in USD CNY INR Trade accounts receivable Receivables from subsidiaries Other assets Trade accounts payable Other liabilities Net risk exposure The net risk exposure improved by EUR 557, (28: EUR 128,) as a result of currency hedges. In addition, the following four interest rate swaps were in place at the end of 29: Nr. Nominal amount Fair value 28 Fair value 29 Maturity date , 6, 4,5 3, Σ 19, As part of the Group s receivables management system, creditworthiness information is obtained from credit insurance agencies for all major new customers and the appropriate payment terms and conditions stipulated. The payment behaviour of existing customers is continuously monitored. In the event of any deterioration, payment terms are amended and the payment behaviour of the customer concerned is carefully monitored. In order to limit losses or avoid bad debts, supply restrictions (such as delivery stop and delivery against upfront payment) are put in place. A small volume of rolling receivables balances are insured against loss. Advance payments from customers reduce the risk of bad debts, particularly in the area of project work. The liquidity risk is managed on the basis of balance sheet and income statement amounts. This is aided by use of the monthly actual/ budget comparison, the monthly forecast for the current year (updated monthly) and the annual forecast for the two subsequent years. The overriding objective is to ensure that the Group always has sufficient liquidity to meet its payment commitments, even in the event that some payments from customers are received late. 73

74 GROUP NOTES Notes to the consolidated income statement (1) SALES Sales by segment Disclosures in Mobile Traffic Technology Stationary Traffic Technology Components Holding company ,795 17,388 94,687 14,98 66,21 67, ,769 28,196 Sales by market Disclosures in Germany Other EU countries Other European countries Other countries , ,32 68,791 69,973 2,554 2,939 49,69 52, ,769 28, % (28: 86.7 %) of sales were billed in Euro, 5.9 % (28: 5.2 %) in Chinese renminbi yuan and 4.3 % in US dollar (28: 7.8 %); other currencies accounted for 1.2 % (28:.3 %). On the expense side, 95.8 % (28: 96. %) of personnel, material and other nonpersonnel expenditure were settled in Euro and 2.2 % (28: 3.1 %) in renminbi yuan; 2. % (28:.9 %) of expenditure was settled in other currencies. Sales generated with the five largest customers amounted to 95,233, or 35.3 % (28: 19,56, or 38.9 %). The previous year s figure was restated from the six largest customers to the five largest customers. (2) CHANGE IN INVENTORIES OF FINISHED GOOD, WORK IN PROGRESS AND OWN WORK CAPITALISED Disclosures in Change in inventories Own work capitalised ,141 1,28 1, ,693 2,159 (3) OTHER OPERATING INCOME Disclosures in ,35 4,191 74

75 GROUP NOTES The other operating income includes income of 2,399, (28: 1,769,) relating to prior periods (mostly income from the reversal of provisions and from the reduction of allowances). The remainder relates mainly to exchange gains of 777, (28: 854,) and gains on derivative instruments of 812, (28: 853,). (4) COST OF MATERIALS Disclosures in Cost of raw materials, supplies and purchased goods Cost of purchased services , ,693 13,992 17, ,387 15,941 A description of the procurement markets and the purchasing strategy of the Schaltbau Group is provided in the Group Management Report. (5) PERSONNEL EXPENSE / EMPLOYEES Disclosures in Wages and salaries Social security, pension and welfare expenses ,176 66,765 13,553 12,593 81,729 79,358 Number of employees Development Purchasing and logistics Production Sales and marketing Management incl. Executive Board members and group company directors Trainees ,54 1,49 The above figures show the average number of employees for the year (on a monthly basis). Further information relating to Schaltbau Group employees can be found in the Group Management Report. 75

76 GROUP NOTES (6) OTHER OPERATING EXPENSES Disclosures in Operational costs Administrative costs Selling costs Employeerelated costs Losses on the disposal of noncurrent assets Allowances on receivables Exchange losses Losses incurred on derivative instruments Other taxes Sundry other expenses ,115 3,9 9,635 9,12 9,587 1,692 1,2 1, ,395 1, ,298 26,545 28,425 Expenses relating to prior periods totalled 186, (28: 313,). Research and development expenditure in 29 amounted to 16,637, (28: 16,83,). The corresponding amount recognised as expense was 15,453, (28: 16,97,). A total of 1,184, (28: 733,) was capitalised. The Group has various rental and leasing agreements in place in particular for property, electronic data processing, vehicles and other office equipment that are due to expire in the coming years. Rental and lease expense in 29 and 28 was 2,722, and 2,447, respectively. The future minimum lease payments under these agreements for the remaining lease terms are as follows: 2,476, (28: 2,138,) payable in up to one year, 5,487, (28: 5,173,) in up to five years and 2,45, (28: 3,222,) later than five years. Purchases from the five largest suppliers accounted for 1.4 % (28: 11.9 %) of total material and nonpersonnelcostrelated expenditure. 76

77 GROUP NOTES (7) RESULTS FROM INVESTMENTS Disclosures in Result from equity accounted investments Sundry other result from investments , , The result from equity accounted investments relates to the Group s share of the profits of BoDo BodeDogrusan and Schaltbau North America. Based on the selling and costs to sell, the sale of the joint ventures Bode Beijing in 29 gave rise to a reversal of a previously recognised impairment loss of 1,739, within the Mobile Transportation Technology segment (see also comments in the Group Management Report); working in the opposite direction, translation differences of 434, recognised in previous years directly in equity were required to be removed from equity as a result of the sale. In addition, the tax expense for the year includes an amount of 2, for the withholding tax arising in conjunction with the sale. The financial statements of the two foreign entities were drawn up in accordance with the accounting rules applicable in the relevant countries. There are no significant differences in the results as compared with financial statements drawn up in accordance with IFRS. If exchange rates had been 1 % more / less favourable, the result from equity accounted investments would have been 849, / 687, (28: 538, / 149,). (8) FINANCIAL RESULT Disclosures in Other interest and similar income (of which from affiliated companies) Interest and similar expenses (of which to affiliated companies) (22) 5,783 (9) 5, (3) 6,587 (15) 6,374 Interest expenses include 99, (28: 959,) relating to the interest component of the allocation to the pension provision. Also included is an interest expense of 1,112, (28: 1,112,) on participation rights capital. The interest expense for the year increased by 387, as a result of the use of interest swaps. In the previous year, they had reduced interest expense by 67,. 77

78 GROUP NOTES A change in the interest rate of plus or minus 1 basis points (i.e. a change of 1 % in the interest rate), would have the following impact on the balance sheet as at 31 December 29 and on cash flows in the following year (assuming for cash flow purposes that there would be no other changes to balances of cash at, and liabilities to banks and to other financial liabilities during the period under review). The interest rates shown are weighted interest rates. Disclosures in Interest rate swap Bank interest Sundry other interest Total cash flow sensitivity Balance at basis points 1 basis points Fair value Interest rate Fair value Income statement impact Equity impact Fair value Income statement impact Equity impact % Disclosures in Interest rate swap Bank interest Sundry other interest Total cash flow sensitivity Balance at basis points 1 basis points Fair value Interest rate Fair value Income statement impact Equity impact Fair value Income statement impact Equity impact % (9) INCOME TAXES Disclosures in Income tax expense Deferred tax expense ,385 2, ,828 2,732 Tax pooling arrangements are in place between Schaltbau Holding AG and German operating companies for corporation, municipal trade and value added tax purposes wherever the conditions for such arrangements are met. 78

79 GROUP NOTES The deferred tax expense relate to the following balance sheet items: Disclosures in Fixed assets Inventories Other current assets Pension provisions Other provisions Liabilities Taxes losses available for carryforward Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities 1, , ,717 5, ,12 1, , ,232 5, ,886 6,549 9, 6,281 No deferred tax assets are recognised on German corporation tax losses available for carryforward amounting to 39,949, (28: 42,43,) and on German municipal trade tax losses available for carryforward amounting to 26,18, (28: 36,395,). In addition, no deferred tax assets are recognised on tax losses available for carryforward at the level of foreign companies totalling 1,859, (28: 87,). These tax losses can be carried forward indefinitely. No deferred taxes are recognised on the retained earnings of subsidiaries and associated companies amounting to 9,327, (28: 8,773,) due to the fact that these profits have been left in the companies concerned to enable them to maintain their substance and expand business. A computation was not made of the potential impact of income taxes on the grounds of disproportionate expense. Reconciliation of expected and actual tax expense in the income statement Disclosures in Profit before tax Expected tax expense (3 %) different computation of taxes outside Germany taxexempt income nondeductible expenses associated companies and interests accounted for using the equity method tax expense and reimbursements for prior years ,92 5, ,84 4, change in valuation allowances on deferred tax assets on tax losses available for carryforward change in tax rates foreign withholding taxes 1, , other differences 49 6 Income tax expense 2,828 2,732 Effective tax rate 16.7 % 17.3 % 79

80 GROUP NOTES (1) EARNINGS PER SHARE Undiluted earnings per share are calculated as a quotient resulting from dividing the group net profit for the year attributable to shareholders of Schaltbau Holding AG by the weighted average number of ordinary shares in circulation during the fiscal year. Earnings per share can be diluted when the average number of shares is increased for potential Schaltbau Holding AG shares that could be issued in conjunction with share options and/or convertible bonds. Share options/ conversion rights have a diluting effect when the conditions for their exercise are met. Undiluted earnings per share can be diluted in future through the issue of convertible bonds and/or option bonds through to 3 June 21 and in this respect no dilution has been taken into account in the following calculation of diluted earnings per share. A conditional capital of up to 5, ordinary shares is available for this purpose. The convertible bond issued in June 27 allows for conversion after the first business day following the Annual General Meeting in 28 and has therefore been taken into account in the following calculation of diluted earnings per share. There were no conversions in 29; in the previous year a total of 2,732 new shares arose from conversions (see also comments in Note (16) Subscribed Capital and Note (22) Liabilities). Disclosures in Shares in circulation at beginning of year New shares arising from convertible bond Share buyback (weighted due to length of time) Shares issued with subscription rights of existing shareholders excluded Calculated number of shares at end of fiscal year Further potential shares from convertible bond Further potential shares from share options [diluted] Actual and potential shares at end of year Weighted shares undiluted Weighted shares diluted ,871,668 5, 1,866, ,47 64 [57] 2,48,772 1,866,668 2,48,772 1,868,936 1,8 3,847 1,866, ,47 64 [58] 2,48,28 1,866,169 2,48,274 Earnings per share Group net profit for year Profit attributable to minority shareholders Profit attributable to shareholders of Schaltbau Holding AG plus: diluting effect of convertible bond Diluted portion attributable to shareholders of Schaltbau Holding AG Earnings per share undiluted Earnings per share diluted 14,92 1,743 12, , ,72 1,229 11, , Reconciliation of undiluted and diluted weighted shares Weighted shares undiluted 64 share options not exercised by ; weighted convertible bonds not exercised by ; maximum number of shares Weighted shares diluted 1,866, ,47 2,48,772 1,866, ,47 2,48,274 8

81 GROUP NOTES Notes to the consolidated balance sheet (11) INTANGIBLE ASSETS, PLANT PROPERTY AND EQUIPMENT AND INVESTMENTS As in the previous year, goodwill amounting to 5,61, (28: 5,61,) relates to the Stationary Traffic Technology segment. Intangible assets include capitalised development costs with a carrying amount of 5,43, (28: 4,246,). Measurement at fair value has only been applied to land. This can be reconciled to the carrying amount before revaluation as follows: Disclosures in Carrying amount including fair value adjustments less revaluation reserve less minority interest in revaluation reserve less deferred tax liabilities Carrying amount before revaluation ,179 9,979 3,41 3, ,37 1,37 5,824 5,624 Debit differences arising on the consolidation of associated companies accounted using the equity method represent goodwill and are included as part as the carrying amount of those companies. No scheduled writedowns are recorded. Instead, the assets are tested annually for impairment. No impairment losses were recognised in 28 or 29. Negative atequity values are not recognised in the consolidated balance sheet. The only Schaltbau Group company with a negative value is OLB Oberlandbahn Fahrzeugbereitstellungs GmbH; the negative value of 3,377, (28: 3,36,) reflects the taxdriven nature of this company s business model and will reverse during the period up to the planned end of its business activities. Investments accounted for using the equity method and goodwill attributable to those companies developed as follows: Disclosures in BOBJ BODO OLB SBUS Shareholding Carrying amount thereof goodwill Shareholding Carrying amount thereof goodwill 49,% 1,853 5,% 3, ,% 3, ,8% 49,8% 5,% ,% , , BOBJ: BODO: OLB: SBUS: Beijing Bode Transportation Equipment Co. Ltd. BoDo BodeDogrusan A.S. OLB Oberlandbahn Fahrzeugbereitstellungs GmbH Schaltbau North America Inc. 81

82 GROUP NOTES Analysis of Changes in Intangible Assets, Property, Plant and Equipment and Investments Consolidated Financial Statements as at Disclosures in Note: Rounding differences may arise due to the use of electronic calculation aids. I. Intangible assets 1. Concessions and similar rights 2. Software 3. Goodwill 4. Capitalised development costs 5. Ongoing development projects 6. Payments in advance II. Property, plant and equipment 1. Land and buildings 2. Plant and machinery 3. Other plant and equipment 4. Assets under construction III. Investments 1. Investments in subsidiaries 2. Atequity accounted investments 3. Investments in other companies 4. Other loans ,758 6,954 33,215 4, ,113 34,329 25,845 32, ,34 1,537 3, ,12 Translation differences Change in group reporting entity Acquisition/manufacturing cost Additions Disposals Reclassfications , ,36 2,333 1,49 2, , ,4 11 1,615 1, , ,412 7,156 33,215 5, ,322 36,523 26,734 33, ,84 2,382 2, , , ,797 2, ,147 82

83 GROUP NOTES Accumulated amortisation, depreciation and impairment losses Carrying amounts Translation differences Change in group reporting entity Additions Disposals Reclassfications/ Reversals of impairment losses , ,747 1, , ,799 1,357 1,866 28,154 28,154 5,61 5, , , ,7 13,622 12,222 12, ,445 27,432 25,878 19,544 1, ,765 5,969 6,31 24, , ,891 7,7 7, , ,218 1,222 61,11 41,337 4, ,53 2,87 2,59 2,59 1,11 1, ,5 1,822 91, , ,11 96,979 2,199 4, ,563 61,522 1,354 6, ,99 6,482 Amounts included in carrying amounts of land and buildings relating to the revaluation of land:

84 GROUP NOTES Analysis of Changes in Intangible Assets, Property, Plant and Equipment and Investments Consolidated Financial Statements as at Disclosures in Note: Rounding differences may arise due to the use of electronic calculation aids. I. Intangible assets 1. Concessions and similar rights 2. Software 3. Goodwill 4. Capitalised development costs 5. Ongoing development projects 6. Payments in advance II. Property, plant and equipment 1. Land and buildings 2. Plant and machinery 3. Other plant and equipment 4. Assets under construction III. Investments 1. Investments in subsidiaries 2. Atequity accounted investments 3. Investments in other companies 4. Other loans ,747 5,932 33,25 3,514 1,116 47,514 32,615 25,289 3,786 1,741 9,431 1,537 3, ,98 Translation differences Change in group reporting entity Acquisition/manufacturing cost Additions Disposals Reclassfications , , , , , , ,482 3,758 6,954 33,215 4, ,113 34,329 25,845 32, ,537 3, ,12 143, ,319 2, ,267 84

85 GROUP NOTES Accumulated amortisation, depreciation and impairment losses Carrying amounts Translation differences Change in group reporting entity Additions Disposals Reclassfications/ Reversals of impairment losses , , , ,88 1,866 1,454 28, ,154 5,61 5,2 4,246 3, ,116 36, ,891 12,222 11,413 12, ,85 25,878 24,789 18, , ,544 6,31 6,666 23, ,852 1,793 24,769 7,251 7, ,741 54, ,64 2,475 57,118 4,27 4, ,485 3, ,53 2,87 87, ,959 2, ,139 1,354 6, ,99 6,482 1,354 6, ,4 6,163 Amounts included in carrying amounts of land and buildings relating to the revaluation of land:

86 GROUP NOTES The following summary shows aggregated key data of investments accounted for using the equity method: Disclosures in Assets Liabilities Sales Net profit for year % Group s share 1 % Group s share 28,59 28,215 15,981 1,574 14,258 14,58 7, * 42,711 33,87 3,997 3,935 21,197 16,453 15,384 1,96 * * Before reversal of impairment losses (28: expense for impairment losses) recorded at Schaltbau Group level Mortgages totalling 16,765, (28: 14,966,) have been given as collateral for liabilities to banks. Collateral assignment and pledges over other property, plant and equipment amounted to 9,766, (28: 1,764,). (12) INVENTORIES Disclosures in Raw material and supplies Work in progress Finished products, goods for resale Advance payments to suppliers ,721 22,886 14,357 24,319 5,693 6, ,116 53,343 Group entities have pledged inventories totalling 23,47, (28: 3,447,) as collateral for liabilities to banks. Writedowns totalling 1,223, (28: 1,445,) were recognised on inventories in 29. Reversals of writedowns totalling 96, (28: 322,) were recognised on inventories in 29 as a result of clearance sales. (13) TRADE ACCOUNTS RECEIVABLE, OTHER RECEIVABLES AND ASSETS Disclosures in Trade accounts receivable Receivables from affiliated companies Receivables from associated companies Receivables from companies with which an investment relationship exists Income tax receivables Positive fair values of derivative instruments Sundry other assets ,814 33,241 1,93 1, ,782 3,593 47,858 39,967 86

87 GROUP NOTES Receivable from affiliated companies comprise trade accounts receivable and a loan receivable totalling 26, (28: 11,). Other assets at 31 December 29 include the purchase price receivable ( 3,469,) relating to the sale of Beijing Bode Transportation Equipment Co. Ltd. Allowances comprised the following: Disclosures in Trade accounts receivable: Specific allowances Additional risk allowance Other allowances ,719 1,283 3,2 62 2, , ,622 3,665 The maximum credit risk corresponds to the carrying amount of accounts receivable less the value of insured receivables totalling 1,64, (28: 8,34,). The agestructure of trade accounts receivable is shown in the following table: Disclosures in Overdue up to 3 days 31 to 6 days 61 to 9 days 91 to 18 days more than 18 days not yet due Carrying amount ,218 4,859 2,964 2,166 2,499 1,171 1,913 1,122 1,391 1,993 14,985 11,311 22,829 21,93 37,814 33,241 Of the trade accounts receivable total reported at 31 December 29, 25.9 % (28: 2.3 %) relate to the five largest debtors % (28: 76.6 %) of total receivables are denominated in Euro, 24.3 % (28: 15.5 %) in CNY, 5.5 % (28: 6.3 %) in USD, 2.2 % (28: %) in INR and 1.1 % (28: 1.6 %) in GBP. Group entities have pledged trade accounts receivable totalling 2,594, (28: 19,752,) as collateral for liabilities to banks. 87

88 GROUP NOTES (14) CASH AND CASH EQUIVALENTS Disclosures in Cheques and cash on hand Cash at bank ,476 5,3 8,56 5,332 The amounts shown have a maturity of up to three months and comprise mainly positive cash balances with banks. (15) CHANGES IN GROUP EQUITY Details relating to the line items presented in the balance sheet are shown in the Statement of Changes in Group Equity. (16) SUBSCRIBED CAPITAL The Company s subscribed capital (share capital) is subdivided into 1,871,668 nonpar value shares. On the basis of the resolution taken at the Extraordinary Shareholders Meeting on 19 December 23, a conditional capital of (28: ) remained in place at 31 December 29; the Company s share capital may therefore be increased by up to by the issue of up to 64 new ordinary bearer shares (Conditional Capital I). This conditional capital was resolved to allow shares to be issued for share options issued by the Company on 15 March 24 in conjunction with participation rights (see also Note (19)). The option rights may be exercised at any time after the date of the Annual General Meeting that approved the annual financial statements as at 31 December 23 and, like the participation rights themselves, have a term of 1 years. The conditional capital increase may only be carried out to the extent that the holders of option rights actually exercise their option to subscribe to shares. So far a total of 499,936 options have been exercised and the Company s share capital has been increased by 1,829,765.76; no options were exercised in 29. At the Annual General Meeting on 1 July 25, the Company s share capital was increased conditionally by up to a further 1,83, by the issue of up to 5, new ordinary bearer shares (Conditional Capital II). Conditional Capital II was resolved to allow shares to be issued to holders of convertible or option bonds and which, in accordance with the authorisation given at the Annual General Meeting on 1 July 25, may be issued through to 3 June 21. In accordance with the authorisation given at the Annual General Meeting on 12 June 27, Conditional Capital II may also be used to issue shares to holders of participation rights with conversion/ option rights ( Extension of Scope resolution). No shares arose in 29 from conversions out of convertible bond issued in 27 (see Note (22) Liabilities). In the previous year, 1,258 partial bonds, each with a nominal value of 1, were converted, giving rise to 2,732 new shares with a par value of 3.66 per share. The Company s share capital was accordingly increased by 1, to 6,85, in 28. The share premium of 116, (reduced by 8, as a result of an adjustment to the reserve due to accounting in accordance with IFRS) was transferred to capital reserves. After these transactions, Conditional Capital II amounted to 1,82,.88 at 31 December 29, unchanged from the previous year, corresponding to the issue of up to 497,268 bearer shares. On the basis of the resolution taken at the Annual General Meeting on 12 July 28, an Authorised Capital of 3,294, was in place at 31 December 29; the Executive Board is authorised, with the approval of the Supervisory Board, to increase the Company s share capital by up to 3,294, by the issue of new shares in return for cash or noncash contributions through to 11 June

89 GROUP NOTES (17) CAPITAL / REVENUE / OTHER RESERVES Capital reserves relate primarily to share premiums arising in conjunction with share capital increases made at the level of Schaltbau Holding AG and amount, unchanged from the previous year, to 6,339, (28: 6,339,). The increase in 28 ( 18,) was due to the conversion of convertible bonds issued in 27 (see also Note (16) Subscribed capital and Note (22) Liabilities). In addition, it was necessary to make a transfer to capital reserves in conjunction with the overestimation of losses ( 1,251,) in connection with the capital reduction in 23 pursuant to 232 AktG (German Stock Corporation Act). Capital reserves also include the equity portion of participation rights amounting to 258, (net of deferred tax of 172,) and the equity component of the convertible bond issued in 27 amounting to 595, (see also Note (19) Participation Rights Capital and Note (22) Liabilities). Revenue reserves comprise retained earnings brought forward as well as the equity impact of converting the consolidated financial statements from a HGB to an IFRS basis. In addition, there was a negative impact (net of deferred tax) of 164, (28: 691,) in connection with the measurement of interest rate swaps. In the previous fiscal year the Company acquired a total of 5, treasury shares with a total nominal value of 18,3 in conjunction with a share purchase programme for Schaltbau Group management. This corresponds to.27 % of the Company s share capital. An equivalent amount paid for the treasury shares (acquisition cost plus transaction costs) totalling 195, was offset against revenue reserves. The proposed appropriation of results for the fiscal year 28 was approved at the Annual General Meeting of Schaltbau Holding AG. Accordingly an amount of 7,, was transferred to revenue reserves. The reserve for income/expenses recognised directly in equity includes translation differences. The revaluation reserve includes the fair value adjustments (net of deferred taxes) recognised on land at the date of firsttime adoption of IFRS. For further details, please refer to the disclosures in the Statement of Changes in Group Equity. (18) MINORITY INTERESTS Minority interests relate to Xi an Schaltbau Electric Corporation Ltd. and ALUD Grundstücksverwaltungsgesellschaft mbh & Co. Vermietungs KG. (19) PARTICIPATION RIGHTS CAPITAL Disclosures in Participation options: 362,73 (number) 7,26 7,2 Holders of participation options are entitled to receive an annual distribution, comprising a fixed and a variable amount. The fixed distribution is 3% of the nominal value of each 2 participation right. The right to receive a distribution, however, only arises to the extent that it can be paid out of Schaltbau Holding AG s net profit for the year calculated in accordance with HGB. Option holders are 89

90 GROUP NOTES also entitled to receive a variable distribution for fiscal years for which a dividend is paid to the shareholders. This variable component corresponds to the dividend paid on the Company s ordinary shares (i.e. it is calculated by applying the same dividend percentage rate to the nominal amount of participation options); this rate may not, however, exceed 12% of the nominal amount of the participation options. The participation options were divided on the date of issue into their equity and debt components. The financial liability was recognised at that date at its fair value. This was calculated as the present value of the nominal amount plus the fixed distribution, discounted using a market discount rate of 3.4 %. The difference between the fair value of the financial liability and the fair value of the participation options was transferred to capital reserves. In subsequent periods, the financial liability is stated at its amortised cost using the effective interest method. The Company bought back a total of 137,27 participation rights on 15 November 26. In accordance with the rules laid down in IAS 32, these are offset directly against participation rights capital presented in the balance sheet, regardless of the fact that the participation right certificates are deposited in a custodian account held by the Company. The current fair value of participation rights capital in circulation at 31 December 29 amounted to 9,34, (28: 7,37,). The participation rights capital fall due for repayment at the close of the ordinary Annual General Meeting at which the financial statements for the year ended 31 December 213 are presented. The amount repayable is 7,255,. (2) PENSION PROVISIONS Pension provisions are recognised as a result of commitments to pay future vested pension benefits and current pensions to present and former employees of the Group and their dependants. Retirement pensions are provided in the form of defined benefit pension plans. These are based in principle on the number of years of service worked by employees and the salary received. The measurement date for the computation of the present value of the defined benefit obligation of the various pension plans is 31 December. Reinsurance policies are in place for some of the pension benefits payable. Claims against insurance companies were as follows: Disclosures in Claims under reinsurance policies relating to pension commitments Group entities are also obliged to pay into defined contribution state pension insurance plans. Employer contributions to these plans for each year were as follows: Disclosures in Employer contributions to state pension insurance plans 5,849 5,766 9

91 GROUP NOTES Reconciliation of defined benefit obligation to pension provisions reported in the balance sheet: Disclosures in Actual defined benefit obligation 19,236 Net amount of unrecognised actuarial gains / losses () 38 17,58 1,47 19, ,16 1,788) Carrying amount of provision at ,856 18,987 19,143 19,318 Pension provisions developed as follows: Disclosures in Balance at 1.1. Pension payments / utilised Service cost (personnel expense) / allocated Interest expense / allocated Carrying amount of provision at ,987 19,143 1,296 1, ,856 18,987 Allocations to pension provisions include (28: ) relating to actuarial gains / losses recognised. The main actuarial assumptions applied were as follows: Interest rate Salary trend Pension trend Fluctuation rate 5,2 % 2,6 % 2, % 1,1 % 5,6 % 2,6 % 2, % 1,3 % Pension expense comprised the following: Disclosures in Service cost (personnel expense) Interest expense ,165 1,127 91

92 GROUP NOTES (21) OTHER PROVISIONS Other provisions developed as follows: Disclosures in Utilised Reversed Allocated Interest impact Currency translation effect Noncurrent provisions Personnel Warranties 4, , , , ,948 Current provisions Personnel Taxes Warranties Outstanding costs and materials Sundry other provisions 5,47 2,75 6,266 2,934 3,166 19,488 4, , ,69 1, ,743 4,493 1,176 2,739 1,991 2,593 12, ,618 2,613 6,57 3,741 2,974 2,453 Total 24,574 11,331 1,843 13, ,41 Tax provisions were recognised mainly to cover the expected income tax expense in Germany. It is expected that most of the amounts provided will be utilised in 21. As a result of the minimum taxation rule introduced in Germany in 24, only the first 1 million of tax losses brought forward and 6% of any remaining tax losses may be offset against taxable income for the current year. Warranty provisions comprise general and specific components. Warranty provisions are utilised over time on the basis of actual warranty expense incurred. This is difficult to predict and can sometimes relate to more than one accounting period. Current personnelrelated provisions are recognised to cover bonuses and special payments, severance pay and statutory social benefits. Noncurrent personnelrelated provisions relate primarily preretirement parttime working arrangements, the transition to ERA and longservice awards. The ERA (Entgelt Rahmenabkommen Framework Agreement on Pay) for the Metals and Electrical Industry has the effect of removing the present distinction between blue and whitecollar workers (wages and salaries) and has created equal remuneration conditions for all employees. The provision recognised in this connection has been computed in accordance with the regulations laid down in the ERA Framework Agreement. Reinsurance coverage has been taken out to cover the obligations relating to preretirement parttime working arrangements. Claims against insurance companies amounted to 953, (28: 1,352,). It is expected that almost all the sundry other current provisions and most of the current personnelrelated provisions will be utilised in the course of the next year. Sundry other provisions comprise mainly provisions for external audit costs, legal disputes, supervisory board remuneration and miscellaneous other items. 92

93 GROUP NOTES (22) LIABILITIES Disclosures in Noncurrent liabilities Liabilities to banks Other financial liabilities Financial liabilities Other liabilities Current liabilities Total liabilities ,757 11,695 29, ,492 Current income tax liabilities 96 Liabilities to banks 24,647 Other financial liabilities 132 Financial liabilities 24,779 Trade accounts payable 15,152 Advance payments received 9,964 Liabilities to affiliated companies 299 Liabilities to other group entities 49 Liabilities relating to derivative instruments 1,46 Sundry other liabilities (of which for taxes) (of which to employees) (of which for social security) Other liabilities 8,299 (1,56) (3,693) (229) 1,53 6,44 89,536 29,881 11,635 41, , , ,415 19,83 14, ,399 1,955 (1,33) (5,52) (42) 13,157 61,146 12,671 The expected cash outflows for the liabilities are spread over the coming years as follows (excluding interest payments). The carrying amounts of the relevant items are shown as a basis for comparison. Disclosures in Carrying amount Total cash outflows within one year 1 to 5 years more than 5 years Financial liabilities Trade accounts payable Derivate instruments Other liabilities 54,231 15,152 1,46 9,51 54,756 15,152 1,46 9,51 24,779 15, ,11 23, ,85 33 Total 79,48 8,5 48,973 24,914 6,118 93

94 GROUP NOTES The agestructure of trade accounts payable is shown in the following table: Disclosures in Overdue up to 3 days 31 to 6 days 61 to 9 days 91 to 18 days more than 18 days Not yet due Carrying amount ,477 5,491 1, , , ,956 9,79 5,196 1,4 15,152 19,83 Collateral of 7,922, (28: 75,929,) has been given to cover liabilities to banks; of this amount, 54,157, (28: 6,963,) relates to pledges and pledgelike collateral and 16,765, (28: 14,966,) to mortgages. Credit lines totalling 65,732, (28: 72,869,) have been made available by banks. The weighted average interest rate as at 31 December 29 for liabilities to banks during the past year was 4.3 % (28: 5.7 %). Interest rates payable on credits that are subject to variable interest rates are fixed for 3 months. Owing to the short period involved, differences between carrying amounts and fair values are small. Liabilities to banks fall due in the next five years and thereafter as follows: Disclosures in thereafter 24,647 8,1 3,413 2,419 1,314 2,61 42,44 Liabilities to banks due for repayment in the year 21 include current account liabilities amounting to 1,71, (28: 5,237,) which are extended from year to year. Other financial liabilities comprise loans payable to parties other than banks (average interest rate of 6.4 % (28: 5.2 %) as in the previous year) and a convertible bond. 94

95 GROUP NOTES The convertible bond, with a nominal amount of 8,5, and an interest rate of 4.75% was offered (in June 27) by Schaltbau Holding AG to its shareholders for subscription. The convertible bond was divided on the date of issue into its equity and debt components. The financial liability was recognised at that date at its fair value. This was calculated as the present value of the nominal amount plus the fixed distribution, discounted using a market discount rate of 6.5 %. The difference between the fair value of the financial liability and the fair value of the participation options was transferred to capital reserves. In subsequent periods, the financial liability is stated at its amortised cost using the effective interest method. Bearers of convertible bonds did not exercise their rights to convert bonds in 29. In the previous year 1,258 bonds were converted with a value of 126,. The convertible bond runs until 1 July 212. The offer for subscription and the bond terms and conditions are posted on the Company's website. The market value of convertible bonds at 31 December 29 was 8,542, (28: 8,81,). Of the trade accounts payable total reported at 31 December 29, 13.9 % (28: 11.9 %) relate to the five largest creditors. Payables are mainly denominated in the following currencies: 88.5 % (28: 9.5 %) in Euro, 8.8 % (28: 6.7 %) in CNY and 2.4 % (28: 2.4 %) in GBP. Other liabilities for taxes relate mainly to value added tax and payroll taxes. Liabilities to employees relate to holiday entitlements, overtime and production pay not yet paid at the balance sheet date. Other Disclosures The following has been notified from the Company pursuant to 26 (1) of the Securities Trading Act (WpHG): Notification dated 15 March 21 We, Golden Peaks Capital Management Ltd., St. Peter Port Guerensey GY1 2QE hereby give you notice as follows: We hereby give notice, pursuant to sec. 21 para. 1 WpHG, that on the voting interest of Golden Peaks Capital Management Ltd. in Schaltbau Holding AG go below the threshold of 3% and amounts to 2.44% (45,694 voting rights) on this day. 2.44% of the voting rights (45,694 voting rights) are attributable to Golden Peaks Capital Management Ltd. in accordance with sec. 22 para. 1 sent. 1 no. 6 WpHG. Voting rights attributed to us are directly held by Golden Peaks Active Value Master Fund Ltd. We, Golden Peaks Active Value Master Fund Limited, Grand Cayman, Cayman Islands hereby give you notice as follows: We hereby give notice, pursuant to sec. 21 para. 1 WpHG, that on the voting interest of Golden Peaks Active Value Master Fund Ltd. in Schaltbau Holding AG go below the threshold of 3% to 2.44% (45,694 voting rights) on this day. We, Altamira Holding AG, Zug, Switzerland, hereby give notice pursuant to sec. 21 para. 1 WpHG that on the voting interest (45,694 voting rights) of Altamira Holding AG in Schaltbau Holding AG go below the threshold of 3% and amounts to 2.44% on this day. 2.44% of the voting rights (45,694) are attributable to Altamira Holding AG in accordance with sec. 22 para. 1 sent. 1 no. 6 WpHG in connection with sec. 22 para. 1 sent. 2 WpHG. 95

96 GROUP NOTES Voting rights attributed to us are directly held by Golden Peaks Active Value Master Fund. I, Adriano Agosti, Switzerland, hereby give notice, pursuant to sec. 21 para. 1 WPHG, that on the voting interest (45,694 voting rights) of Adriano Agosti in Schaltbau Holding AG go below the threshold of 3% and amounts to 2.44% on this day. 2.44% of the voting rights (45,694 voting rights) are attributable to Adriano Agosti in accordance with sec. 22 para. 1 sent. 1 no. 6 WpHG in connection with sec. 22 para. 1 sent. 2 WpHG. Voting rights attributed to us are directly held by Golden Peaks Active Value Master Fund. No notifications were received during the fiscal year 29. Notification dated 28 November 28 Pioneer Asset Management S.A., Luxembourg, Luxembourg gave notice on pursuant to 21 para. 1 WpHG that its shares of voting rights in Schaltbau Holding AG went below the threshold of 3% on and amounted to 2.83% on that day (corresponding to 52,989 votes). Notification dated 13 June 28 Die BadenWürttembergische Versorgungsanstalt, Tübingen, Germany gave notice to us on pursuant to 21 para. 1 WpHG that that its voting interest (via shares) in Schaltbau Holding AG went below the threshold of 3% on and amounts to 2.54% on that day (47,396 voting rights). Notification dated 12 June 28 BadenWürttembergische Investmentgesellschaft mbh, Stuttgart, Germany, gave notice to us on pursuant to 21 para. 1 WpHG that its voting interest (via shares) in Schaltbau Holding AG went below the threshold of 3% on and amounts to 2.75% on that day (51,396 voting rights). 2.54% of the voting rights (47,396 voting rights) are attributable to BadenWürttembergische Investmentgesellschaft mbh pursuant to 22 para. 1, sent 1, no. 6 WpHG. Notification dated 11 February 28 UniversalInvestmentGesellschaft mbh Frankfurt am Main, Germany, gave notice to us on pursuant to 21 para. 1 WpHG in conjunction with 32 para. 2 InvG that its voting interest (via shares) in Schaltbau Holding AG went below the threshold of 3% on and amounts to 2.77% on that day (51,852 voting rights). Notification dated 6 September 27 IFOS Internationale Fonds Service AG, Vaduz, Lichtenstein, gave notice to us on pursuant to 21 para. 1 WpHG that its voting interest (via shares) in our Company at surpassed the threshold of 3% and amounted to 3.52% on that date (corresponding to 65,873 votes). Notification dated 12 April 26 SATORA Beteiligungs GmbH, BadenBaden, gave notice on 1 April 26 pursuant to 21 para. 1 WpHG that its share of voting rights in the Company on 5 April 26 had gone below the 1% and that it amounted to 9.938% (corresponding to 185,6 shares) on that date. These voting rights are held directly by SATORA Beteiligungs GmbH. Notification dated 1 February 26 Hans Jakob Zimmermann, Essen, gave notice on 6 February 26 pursuant to 21 WpHG that his share of voting rights in the Company on 4 May 25 had gone below the 1% threshold and that it amounted to 7.77% on that date (corresponding to 132,3 votes). 96

97 GROUP NOTES FEE EXPENSE FOR EXTERNAL AUDITORS The fee expense for external auditors in 29 for the audit of financial statements amounted to 515, (28: 525,). Of this amount 44, (28: 49,) related to KPMG entities belonging to the KPMG LLP group of companies. In addition, KPMG Germany was paid 12, (28: 12,) for other attestation services and 42, (28: 167,) for other services. Contingent liabilities and other financial commitments Disclosures in Contingent liabilities Bank guarantees Group guarantees Guarantees of credit insurers (of which to affiliated companies) 3,273 5,177 6,486 14,936 (128) 2,266 5,67 6,48 14,353 () Other financial commitments Rental and lease expenses 1,413 1,533 Other commitments 2,231 2,719 The contingent liabilities relate mainly to performance and settlement guarantees. Guarantees provided by credit insurers were not disclosed in the previous year; the figure for the previous has been restated accordingly. At present it is very unlikely that the guarantees given will be called upon and that therefore there will be an outflow of funds. The rental and leasing expenses shown under other financial obligations have been calculated on the basis of the earliest possible cancellation dates. Minimum lease payments for rental/lease arrangements are spread over the following future years as follows: up to one year 2,476, (28: 2,138,), between one and five years 5,487, (28: 5,173,) and later than five years 2,45, (28: 3,222,). Other financial obligations are all of a nature and amount customary for the business. 97

98 GROUP NOTES Disclosures on financial instruments in accordance with IFRS 7 The carrying amounts and fair values of financial instruments by categories in accordance with IAS 39 were as follows at 31 December: Disclosures in Carrying amount Amortised cost Recognised directly in equity Fair value Recognised in income statement Fair value Financial assets Measured at fair value through profit and loss Derivatives without hedge relationship Loans and receivables Trade accounts receivable Other assets Cash and cash equivalents 37,814 9,29 8,56 37,814 9,29 8,56 37,814 9,29 8,56 55,529 55,529 55,529 Availableforsale Other investments 1) 2,347 2,347 2,347 Not classified to category pursuant to IAS 39 Derivatives with hedge relationship Financial liabilities Measured at fair value through profit and loss Derivatives without hedge relationship At amortised cost Trade accounts payable Debt Sundry other liabilities 15,152 61,257 9,51 15,152 61,257 9,51 15,152 61,257 9,51 85,46 85,46 85,46 Not classified to category pursuant to IAS 39 Derivatives with hedge relationship 1,4 1,4 1,4 1) Fair value of investments in other entities cannot be determined due to the lack of an active market. They are therefore measured at amortised cost. It is not planned to sell these financial instruments. 98

99 GROUP NOTES Disclosures in Carrying amount Amortised cost Recognised directly in equity Fair value Recognised in income statement Fair value Financial assets Measured at fair value through profit and loss Derivatives without hedge relationship Loans and receivables Trade accounts receivable Other assets Cash and cash equivalents 33,241 5,458 5,332 33,241 5,458 5,332 33,241 5,458 5,332 44,31 44,31 44,31 Availableforsale Other investments 1) 1,56 1,56 1,56 Not classified to category pursuant to IAS 39 Derivatives with hedge relationship Financial liabilities Measured at fair value through profit and loss Derivatives without hedge relationship At amortised cost Trade accounts payable Debt Sundry other liabilities 19,83 61,934 11,792 19,83 61,934 11,792 19,83 61,934 11,792 93,556 93,556 93,556 Not classified to category pursuant to IAS 39 Derivatives with hedge relationship ) Fair value of investments in other entities cannot be determined due to the lack of an active market. They are therefore measured at amortised cost. It is not planned to sell these financial instruments. 99

100 GROUP NOTES Fair value hierarchy: At 31 December 29 the financial assets and liabilities shown in the following table were measured at fair value. The measurement and presentation of fair values of financial instruments is based on a fair value hierarchy which takes account of the significance of the input data used to measure fair value and can be analysed as follows: Level 1: based on prices quoted (applied without adjustment) on active markets for identical assets and liabilities Level 2: based on input data for the asset or liability observable either directly (in the form of prices) or indirectly (derived from prices) which do not represent quoted prices according to level 1 Level 3: input data not based on observable market data to measure the asset or liability (nonobservable input data) Disclosures in Financial assets Measured at fair value through profit and loss Derivatives without hedge relationship Not classified to category pursuant to IAS 39 Derivatives with hedge relationship Level 1 Level 2 Level Financial liabilities Measured at fair value through profit and loss Derivatives without hedge relationship Not classified to category pursuant to IAS 39 Derivatives with hedge relationship 6 1,4 6 1,4 There were no reclassifications during the fiscal year 29 between level 1 and level 2 in conjunction with measurement at fair value. There were similarly no reclassifications to level 3 in conjunction with measurement at fair value. Net gains and loss by measurement category Disclosures in Measured at fair value through profit and loss Loans and receivables Measured at amortised cost Availableforsale

101 GROUP NOTES Net gains and losses result primarily from exchange rate factors, changes in writedowns/allowances and gains/loss arising on fair value measurement. Net losses of 164, (28: 694,) arising on derivatives in a hedging relationship were recognised directly in equity. These are not included in the analysis above. Capital management disclosures Schaltbau focuses in capital management terms principally on improving group equity and complying with an appropriate (i.e. from a rating perspective) debt coefficient (net liabilities to banks / EBITDA). The Company s Articles of Incorporation do not stipulate any capital requirements. Group equity improved again in 29 thanks to positive group earnings for the year. At 31 December 29, group equity stood at 2.5 million and was was therefore 11.9 million higher than one year earlier. Despite the difficult economic environment, the aim is to improve the group equity ratio further over the coming years from its current level of 12 %. The Group s debt coefficient was slightly reduced in 29 and now stands at 1.3 (28: 1.4). For further disclosures, reference is made to comments in the Group net assets and financial position section of the Group Management Report. Corporate governance The necessary declaration pursuant to 161 AktG relating to the German Corporate Governance Code has been issued and was posted to the Company s website on 2 December 29. Related party transactions Transactions between fully consolidated companies on the one hand and associated and nonconsolidated companies on the other are disclosed below from the perspective of the fully consolidated companies: Disclosures in Associated companies Goods and services Other relationships Nonconsolidated companies Goods and services Other relationships Volume of services performed 3,43 3, ,691 5,899 Volume of services received , ,332 The following receivables and payables existed at the balance sheet date from the perspective of the fully consolidated companies (mostly relating to the supply of goods). Disclosures in Associated companies Nonconsolidated companies Receivables Liabilities , ,

102 GROUP NOTES Segments The Group s segment designations are productoriented. The Group s business units are allocated to the segment for which they generate most of their sales. As a general rule, sales of materials between group companies are billed on the basis of arm s length principles. Costs are recharged to group companies without markup. Geographical segments Disclosures in Assets Capital expenditure External sales Germany Other EU countries Other European countries Other countries 132,865 11,3 3,48 2, ,871 12,166 3,969 18,118 8, , ,734 68,791 2,554 49,69 137,32 69,973 2,939 52, , ,124 9,798 6, ,769 28,196 12

103 GROUP NOTES CONSOLIDATED CASH FLOW STATEMENT a) Cash flow from operating activities (indirect method) The cash flow from operating activities in 29 amounted to 16.2 million, which was approximately 3.2 million higher than in the previous year. Compared to the previous year the cash outflow for current liabilities increased by EUR 8.3 million as a result of lower advance payments received (EUR 1.6 million), lower trade accounts payable due to increased use of settlement discount (EUR 2.7 million) and lower other liabilities (EUR 4. million). These changes were, however, more than offset by significantly higher cash flows from current assets amounting to EUR 11.3 million; the decrease in inventories (28: increase) created a positive effect of approximately EUR 17. million which was partly offset by an increase in trade accounts receivable. b) Cash flow from investing activities The cash outflow for investing activities amounted to 9.8 million in 29 and was thus 1.5 million higher than in the previous year. The increase was mainly attributable to capital expenditure on land and buildings at the level of Pintsch Bamag GmbH. Capital expenditure on financial investments related almost entirely to newly founded subsidiaries in China and India. c) Cash flow from financing activities The cash out flow of 3.2 million from financing activities results, in addition to the dividend payment to shareholders of Schaltbau Holding AG and distributions to minority interests, to a small decrease in liabilities to banks (.6 million) and a cash outflow in conjunction with intercompany financing (.6 million). EVENTS AFTER THE REPORTING PERIOD On 19 March 21, a Consortium Credit Agreement for EUR 5 million was concluded by Commerzbank AG, Bayern LB and DZBank on the one side and Schaltbau Holding AG on the other. Under this agreement, the Cash Pool will be reduced by an amount of EUR 45 million (mainly short and medium term credits). An amount of EUR 2 million will become a loan repayable in instalments and the remainder (EUR 3 million) will be available as a credit line. The full amount of this funding has been committed until 19 March 213 and has been granted without the requirement to put up collateral. The credit agreement does include assurances and covenants customary for this type of financing. The subsidiaries Schaltbau GmbH, Pintsch Bamag GmbH and Pintsch Bubenzer GmbH are party to the credit agreement as borrowers and guarantors. 13

104 GROUP NOTES Segment Information Disclosures in Mobile Traffic Technology Stationary Traffic Technology Orders intake (external) 11, ,534 8,649 98,446 Sales 18,795 17,391 95,64 15,433 of which external 18,795 17,388 94,687 14,98 of which with other segments Order book (external) 89,256 96,26 4,56 55,66 Result from operating activities (EBIT) 5,978 4,23 8,925 11,776 Result from atequity accounted companies 2,19 14 Interest income Interest expense 881 1,18 1,79 1,179 Income taxes Segment result / Group result *1) 7,771 3,52 7,397 1,616 Changes in group reporting entity Capital expenditure 1, ,735 2,649 Amortisation and depreciation 1,529 1,515 1,564 1,595 Impairment losses 85 1, Reversal of impairment losses ,172 Other significant noncash expenses 5,54 4,72 4,26 4,323 Segment assets *2) 55,53 52,18 58,156 6,982 Investments accounted for at equity 3,48 5,823 Capital employed *3) 4,521 4,818 4,496 36,346 Segment liabilities *4) 35,8 4,83 42,685 46,61 Employees (average as per HGB) EBIT margin *5) 5,5% 3,9% 9,4% 11,2% Return on capital employed (ROCE) *6) 14,8% 1,4% 22,% 32,4% *1) transfers in conjunction with profit and loss transfer agreements are added back to the segment result *2) Balance sheet total *3) Working capital (inventories + trade accounts receivable advance payments received trade accounts payable) plus noncurrent assets excluding deferred tax assets *4) Liabilities *5) EBIT / external sales *6) EBIT / capital employed 14

105 15 69, ,558 66, ,587 9, , ,18 2, 2, ,178 61, ,867 41, ,6% 2,6% 7, ,155 67, ,363 9, , , ,761 2, ,77 61, ,796 44, ,7% 19,4% 251, , ,692 1, ,43 24,542 2, , ,276 9,4 6,26 1, , ,696 4, , ,743 1, , ,979 28, ,635 25, ,58 1,49 21, ,292 5,947 2,24 1,443 12, ,858 6, ,96 131,36 1, , ,265 4, ,53 2,359 9, ,92 6, ,548 27, , ,79 1,323 7, ,78 6,734 12,317 28, , , ,43 2,319 2, ,783 2,828 14,92 9,798 6,124 1, , ,888 4, , ,368 1,437 7,5% 17,6% 281, , ,635 21, ,587 2,732 13, ,318 5,959 2,24 1,443 16,53 168,124 6, , ,516 1,424 7,8% 19,4% Components Subtotals Holding company other consolidations Schaltbau Group GROUP NOTES

106 GROUP NOTES Representative bodies and mandates of members of the Supervisory Board and Executive Board Members of the Executive Board Dr. Jürgen H. Cammann Executive Board spokesman Waltraud Hertreiter Member of the Executive Board Member of the Supervisory Board of: Textilgruppe Hof AG, Hof Members of the Supervisory Board Hans Jakob Zimmermann Chairman Representative of Sal. Oppenheim jr. & Cie. KgaA, Cologne Chairman of the Supervisory Board of GARANT Schuh + Mode AG, Düsseldorf (from ) Member of the Supervisory Board of SIAG Schaaf Industries AG, Dernbach MERKUR BANK KGaA, Munich Member of the Administrative Board of Rheinzink GmbH & Co. KG, Datteln Chairman of the Advisory Board of anteholz GmbH, BromskirchenSomplar Member of the Advisory Board of Commerzbank Bank AG, Frankfurt (formerly: Dresdner Bank AG) Peter Jahrmarkt Deputy Chairman Officer with general authority (Generalbevollmächtigter) of heristo holding GmbH, Bad Rothenfelde Member of the Supervisory Board of heristo aktiengesellschaft, Bad Rothenfelde Karl Uwe van Husen Director of Elrega GmbH, Ludwigsburg Member of the Supervisory Board of ElringKlinger AG, Dettingen/Erms 16

107 GROUP NOTES Marianne Reindl Secretary Chairwoman of Group Works Council of Schaltbau Holding AG, Munich General Works Council of Schaltbau GmbH, Munich Deputy Chairwoman of Works Council of Schaltbau GmbH, Werk Aldersbach Dr. Stefan Schmittmann Member of the Management Board of Commerzbank AG, Frankfurt Member of the Supervisory Board of Verlagsgruppe Weltbild GmbH, Augsburg Deutsche Schiffsbank AG, Hamburg/Bremen (until ) Eurohypo AG, Eschborn (from ) Commerzbank Auslandsbanken Holding AG, Frankfurt (from ) BRE Bank SA, Warsaw (from ) Chairman of the Supervisory Board of Eurohypo AG, Eschborn (until ) Commerz Real AG, Düsseldorf/Wiesbaden (until ) Commerz Real Investmentgesellschaft mbh, Wiesbaden (until ) Deputy Chairman of the Supervisory Board of Commerz Real AG, Düsseldorf/Wiesbaden (from ) Chairman of the Administrative Board of KG Allgemeine Leasing GmbH & Co. KG, Grünwald (from ) Horst Wolf Employee Chairman of Works Council of Pintsch Bamag GmbH, Dinslaken Member of Group Works Council of Schaltbau Holding AG, Munich 17

108 GROUP NOTES REMUNERATION OF PERSONS IN KEY POSITIONS The total remuneration of the Executive Board for the fiscal year 29 amounted to 943, (28: 784,). The Group does not disclose an analysis of remuneration by individual members of the Executive Board as a result of the resolution taken at the Annual General Meeting on 7 July 26. The expense for remuneration paid to members of the Supervisory Board (including subsidiaries) amounted to 144, (28: 137,). In addition, a remuneration of 12, (28: 8,) was paid to one member of the Supervisory Board in 29 in accordance with the Articles of Incorporation ( 13 para. 1 of the Articles of Incorporation of Schaltbau Holding AG). Pension obligations to former members of the Executive Board and their surviving dependents amounted to 571, (28: 627,). The expense for remuneration paid to former members of the Executive Board and their surviving dependents amounted to 94, (28: 94,). As at 31 December 29, a total of 221,1 shares of the Company and 768 convertible bonds with a nominal amount of 1 each (total volume 76,8) were held, directly or indirectly, by Dr. Cammann, the spokesman of the Executive Board of Schaltbau Holding AG. Mr. Zimmermann, a member of the Supervisory Board, holds, directly or indirectly, a total of 188,786 shares of the Company and 7,92 convertible bonds with a nominal amount of 1 each (total volume 792,). Mr. Jahrmarkt, a member of the Supervisory Board, holds, directly or indirectly, a total of 2, shares of the Company and 45 convertible bonds with a nominal amount of 1 each (total volume 4,5). PROFIT DISTRIBUTION PROPOSAL It is proposed to the shareholders at the Annual General Meeting of Schaltbau Holding AG that the unappropriated profit of Schaltbau Holding AG be used as follows: Disclosures in Payment of a dividend of.5 per share each representing 3.66 of the Company s share capital of 6,85,34.88 plus a special dividend from the sale of Beijing Bode Transportation Equipment Co. Ltd. of.2 per share each representing 3.66 of the Company s share capital of 6,85,34.88 Transfer to revenue reserves To be carried forward Unappropriated profit 935, , ,,. 126, ,436, Munich, 29 March 21 The Executive Board Dr. Jürgen H. Cammann Waltraud Hertreiter 18

109 RESPONSIBILITY STATEMENT Responsibility Statement To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit of the Group, and the Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Munich, 29 March 21 Schaltbau Holding AG The Executive Board The Executive Board Dr. Jürgen H. Cammann, BadenBaden Spokesman of the Executive Board Waltraud Hertreiter, Neubeuern Dr. Jürgen H. Cammann Waltraud Hertreiter 19

110 SUPERVISORY BOARD The Supervisory Board Members of the Supervisory Board: Hans Jakob Zimmermann Chairman of the Supervisory Board Representative of Sal. Oppenheim jr. & Cie. KGaA, Cologne Peter Jahrmarkt Deputy Chairman of the Supervisory Board Officer with general authority of heristo holding GmbH Marianne Reindl * Secretary Dr. Stefan Schmittmann Member of Executive Board of Commerzbank AG, Frankfurt Karl Uwe van Husen Managing Director of Elrega Grundstu cksverwaltung GmbH, Ludwigsburgg Horst Wolf * Employee * Employee representatives 11

111 REPORT OF THE SUPERVISORY BOARD Report of the Supervisory Board Supervisory Board activities during the reporting year During the fiscal year 29 the Supervisory Board of Schaltbau Holding AG again performed the duties charged to it in accordance with the law and the Articles of Incorporation with great diligence, dedicating its attention to the business matters of the Company. The Executive Board reported regularly, promptly and comprehensively to the Supervisory Board in both written and oral reports on business performance, corporate policy and fundamental issues relating to financial, investment and personnel policies as well as on matters concerning the profitability and the risk situation of both Schaltbau Holding AG and the Schaltbau Group. Other main topics of report included the strategic orientation of the Schaltbau Group and related activities. Furthermore, the Supervisory Board regularly advised the Executive Board in its management duties and monitored the governance of the Company. All transactions requiring the approval of the Supervisory Board were discussed in detail with the Executive Board prior to granting approval. With the aid of reports and information received from the Executive Board, the Supervisory Board assured itself of the proper governance of the Company and ascertained that the requirements of the risk management system both at Schaltbau Holding AG and throughout the Group were complied with. The Executive Board also informed the members of the Supervisory Board regarding important and urgent events between meetings. Main focus of Supervisory Board meetings Four regular Supervisory Board meetings took place during the year under report, which were all attended by the entire board. Regular items on the agenda were the discussion and assessment of strategic options and requirements. Furthermore, the general situation and possible courses of action with regard to Beijing Bode Transportation Equipment Co. Ltd were also the subject of intensive deliberation. Gebr. Bode GmbH & Co. KG, a wholly owned subsidiary of Schaltbau Holding AG, owned a 49% stake in the company via its subsidiary Gebr. Bode & Co. BeteiligungsGmbH. At the meeting held on 18 September the Supervisory Board was informed of the key data pertaining to the forthcoming sale and granted its approval in a circular resolution on 11 November. At the following meeting on 2 December the Executive Board informed the Supervisory Board that the sale had been concluded. The monthly reports were closely examined at each of the Supervisory Board meetings. These status reports supply information regarding incoming orders, sales and profitability both on a monthly basis and cumulatively, including actual and budget variances. The reports also document the liquidity and the financial situation including the status of current credit lines and the amounts drawn down by entity as well as the available liquidity based on actual and forecasted figures. Furthermore, the Supervisory Board reviewed developments in orderintake, sales, costs and earnings for the various business fields and subsidiaries of the Schaltbau Group and discussed these with the Executive Board. Personnel decisions included the removal and reappointment of managing directors in subsidiaries as well as fundamental Executive Board matters such as the extension of the terms of office of Executive Board members and their service contracts and the adjustment of the service contracts in line with legislative changes. During the fiscal year 29 the Supervisory Board concentrated mainly on the following topics in the course of its monitoring activities: At the meeting held on 2 April 29 to consider the financial statements, the Supervisory Board examined and approved the Company Financial Statements, the Group Financial Statements and the Combined Management Report of Schaltbau Holding AG and the Schaltbau Group for the fiscal year 28. The Supervisory Board also thoroughly discussed the Executive Board s proposal regarding the appropriation of unappropriated profit from 28 and concurred with it. In this context the Supervisory Board also discussed numerous questions with the external auditors who were present. Apart from topics concerning the approval of the Company Financial Statements, the agenda also included the establishing of a Schaltbau GmbH representative office in Moscow, which was also decided upon after detailed discussion as well as the reorganisation of SAP support as a centralised service to be provided by Schaltbau Holding AG for the entire Group. Furthermore, the Corporate Governance report was adopted. At the Supervisory Board meeting held on 8 June 29 a resolution was passed to establish a subsidiary of Schaltbau GmbH in India. At its meeting held on 18 September the Supervisory Board also carefully reviewed the annual risk report with regard to significant individual risks and general potential risks and carried out the annual efficiency examination. In the two meetings held on 18 September and 2 December 29 respectively, alternative courses of action were discussed concerning the project for manufacturing platform doors in China, culminating in the decision to form a subsidiary of Pintsch Bamag GmbH instead of the originally planned joint venture. The establishing of an overseas location of Bode was subjected to review in the two Supervisory Board meetings of 2 April and 18 September. 111

112 REPORT OF THE SUPERVISORY BOARD At the meeting held on 2 December 29 the Supervisory Board viewed a presentation given by the auditors Deloitte & Touche on the effectiveness of the internal control system and the handling of the internal audit within the Schaltbau Group, which was the subject of extensive debate. After lengthy discussion the budget for for the Schaltbau Group was ultimately approved and the Declaration of Compliance with the German Corporate Governance Code was discussed and adopted on the basis of the version of the Code amended on 18 June 29. The Chairman of the Supervisory Board and the Executive Board maintained regular contact in addition to their formal meetings and joint consultations. The Chairman of the Supervisory Board continually obtained information from the Executive Board concerning current developments, the business situation and other important events. He was promptly informed by the Executive Board of any extraordinary events relevant for assessing the financial condition and performance of both the Company and the Group. Personnel Committee work The Supervisory Board's Personnel Committee held two meetings during the year under report. The main issues discussed included preparing the resolution concerning the extension of Executive Board contracts and the legally required amendment of the contracts. No other committees exist within the Supervisory Board. An Audit Committee has been provided for under the rules of procedure of the Supervisory Board, but has, however, not been formed in view of the total size of the Supervisory Board. No further committees were appointed, particularly in view of the fact that a consistent flow of all company and other relevant information to all members of a 6person Supervisory Board is eminently achievable. Company and Group Financial Statements 29 At the proposal of the Supervisory Board, the Annual General Meeting elected KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, as external auditor for both the AG and the Group. After the conclusion of the Annual General Meeting the Chairman of the Supervisory Board appointed the external auditor in writing to audit the financial statements. Prior to proposing KPMG AG Wirtschaftsprüfungsgesellschaft for election as Company and Group auditor, KPMG AG furnished the Chairman of the Supervisory Board with a written statement that no circumstances exist which could impair its independence as external auditor. The external auditor audited the Company Financial Statements of Schaltbau Holding AG and the Group Financial Statements as at 31 December 29 as well as the Combined Management Report, together with the bookkeeping system, and issued unqualified auditors' reports thereon. The external auditor provided a copy of the longform audit report to each member of the Supervisory Board. The documents pertaining to the financial statements, including the longform audit reports prepared by the external auditor, were made available to each of the members of the Supervisory Board in good time in order to ensure a careful and thorough examination by the Supervisory Board. The Supervisory Board held its financial statements approval meeting together with the Company s external auditor on 16 April 21. At this meeting the Company Financial Statements of Schaltbau Holding AG and the Group Financial Statements as at 31 December 29, the Combined Management Report and the longform audit reports were discussed in detail with the external auditor, who in turn reported on the course of the audit and the main findings. 112

113 REPORT OF THE SUPERVISORY BOARD The Supervisory Board examined the Company Financial Statements, the Group Financial Statements, the Combined Management Report and the Executive Board s proposal for the appropriation of the Company s unappropriated profit. After concluding its own examination, the Supervisory Board did not raise any objections and concurred with the result of the audit of the Company Financial Statements, the Group Financial Statements and the Combined Management Report. The Supervisory Board formally approved the Company Financial Statements of Schaltbau Holding AG and the Group Financial Statements for the fiscal year 29 submitted to it by the Executive Board. The Company Financial Statements were accordingly adopted. The Supervisory Board approved the Combined Management Report, including the assertions regarding the further development of the business and the disclosures pursuant to 289 para. 4, 5 and 315 para. 2 no. 5 and para. 4 of the German Commercial Code. The Supervisory Board also approved the Corporate Governance Statement. The Supervisory Board additionally approved the proposal made by the Executive Board regarding the appropriation of unappropriated profit. The risk management system was reviewed by the external auditor. The external auditor confirmed that the Executive Board has put the required measures in place in accordance with 91 (2) of the German Stock Corporation Act and has installed a monitoring system that adequately detects any developments that pose a threat to the goingconcern status of the Company or of individual Group entities. Representative bodies of the Company Since the election in the fiscal year 26 the Supervisory Board has consisted of six members: Hans Jakob Zimmermann, Essen, Chairman of the Supervisory Board, Peter Jahrmarkt, Ratingen, Deputy Chairman of the Supervisory Board, and as shareholders' representatives, Karl Uwe van Husen, Waiblingen and Dr. Stefan Schmittmann, Grünwald. The employees are represented on the Supervisory Board by Marianne Reindl, Egglham, and Horst Wolf, Dinslaken. The Supervisory Board s term of office will cease at the end of the Annual General Meeting, during which the shareholders will vote on ratifying the actions of the Supervisory Board for the fiscal year 21. The Supervisory Board particularly wishes to thank the Executive Board, the managements of the various Group companies, the works council and the entire staff of the Group for the dedicated and successful work performed during the past fiscal year. Munich, April 21 Hans J. Zimmermann Chairman of the Supervisory Board 113

114 SCHALTBAU HOLDING AG Balance Sheet of Schaltbau Holding AG, Munich as at 31 December 29 ASSETS Disclosures in A. FIXED ASSETS I. Intangible assets II. Property, plant and equipment III. Investments 1, ,949 74,149 81,569 75,78 B. CURRENT ASSETS I. Receivables and other assets II. Marketable securities III. Cash and cash equivalents 13,831 9, ,29 9,61 C. PREPA ID EXPENSES ,929 85,133 EQUITY AND LIABILITIES Disclosures in A. EQUITY CAPITAL I. Subscribed capital (Conditional capital E 1,82,) II. Capital reserves III. Revenue reserves IV. Participation rights capital V. Unappropriated profit 6,85 8,212 23,231 1, 9,436 57,729 6,85 8,212 16,231 1, 8,125 49,418 B. PROVISIONS 1. Provisions for pensions and similar obligations 2. Other provisions 5,987 4,93 1,8 6,22 3,87 9,829 C. LIABILITIES 28,12 25,886 95,929 85,

115 SCHALTBAU HOLDING AG Income Statement of Schaltbau Holding AG, Munich for the Fiscal Year 1 January 31 December 29 Disclosures in 1. Sales 2. Other operating income 3. Cost of materials 4. Personnel expense 5. Amortisation and depreciation 6. Other operating expenses 7. Income from profit transfers 8. Net interest expense 9. Profit from ordinary activities 1. Taxes 11. Net profit 12. Unappropriated profit brought forward 13. Unappropriated profit ,465 1,238 3, , ,781 2, ,55 1,765 13,262 15,289 2,137 2,792 1,214 9, ,343 9,244 8, ,436 8,

116 AUDITOR S REPORT Auditor s Report We have audited the consolidated financial statements prepared by the Schaltbau Holding AG, Munich, comprising the balance sheet, the income statement, transition from group net profit to total comprehensive income, statement of changes in equity, cash flow statement and the notes to the consolidated financial statements, together with the group management report for the business year from January 1 to December 31, 29. The preparation of the consolidated financial statements and the group management report in accordance with IFRSs, as adopted by the EU, and the additional requirements of German commercial law pursuant to 315a Abs. 1 HGB [Handelsgesetzbuch "German Commercial Code"] are the responsibility of the parent company`s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with 317 HGB [Handelsgesetzbuch German Commercial Code ] and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accountingrelated internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs, as adopted by the EU, the additional requirements of German commercial law pursuant to 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group s position and suitably presents the opportunities and risks of future development. Munich, March 3, 21 KPMG AG Wirtschaftsprüfungsgesellschaft Zastrow Wirtschaftsprüfer Moesta Wirtschaftsprüfer 116

117 IMPRINT Editor Schaltbau Holding AG Hollerithstr. 5 D81829 Munich Phone: +49 () 89/93 5 Fax: +49 () 89/ [email protected] Concept & Creation Annette Himken idplus, Werbung + Marketing Photos istockphoto Fotolia LLC other photos Schaltbau Group

118 Schaltbau Holding AG Hollerithstr. 5 D81829 Munich Phone: +49 () 89/93 5 Fax: +49 () 89/ [email protected]